5 Top Factors Insurance Carriers use in determining your Auto Insurance Rates

Many people often ask this question, especially around the holidays…WHY ARE MY INSURANCE PREMIUMS SOOO HIGH??!

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There are many different factors that go into determining how much you pay for your auto insurance and your promise to be a good a driver isn’t one of them-sorry. Know that different insurance carriers use different underwriting methods to calculate your premiums but most insurance carriers use the following criteria to figure out how much or how little to take from you on a monthly, quarterly or bi-yearly basis; depending on the length your contract or policy.

1. Driving History. EVERY driver knows that if you have a spotless driving history, chances are you will be paying a lower premium than a person who has a couple of marks on his or her driving record. There are 2 factors used to determine if you have a good or a bad driving record and that comes down to the number of infractions or tickets and the number of accidents you have on your record. Some companies will even include the number of suspensions and/or revocations on your license to determine your premium. This is especially used when you are shopping for a new auto insurance carrier, so know your driving history prior to applying to these insurance companies. You can do this by requesting a copy of your driving history or an abstract of your driving history from the DMV, but you will be required to pay a fee anywhere between $10 - $20. It is always better to arm yourself with the same knowledge that can be used against you.

2. Length of Driving History. Insurance carriers will always factor in the length of time a person has been driving without regard to age. Some states have a special surcharge for newly licensed drivers, which is called an inexperienced operator surcharge. An inexperienced operator surcharge is used to charge extra premium to account for the potential of a driver getting into an accident. Since the driver has little driving experience, the likelihood of that person getting into an accident is much greater than a person who’s been licensed for 20 years or more. Different states have different time periods of how long this surcharge will affect a driver’s rate but generally, you can have that surcharge from 1 – 3 years, depending on the state.

3. Rated Location. YES-LOCATION! (Sorry BKLYN) Have you ever moved to a different address and since you are such a great policyholder, you notify your insurance carrier and your rates increase??!! Yes folks!!, Unfortunately a change of address can sometimes double or even triple your insurance premiums. I’ve had a policyholder move across the street from their previous address and their insurance rates increase by 50%!! Can you believe that?! When that policyholder moved across the street, they were in a different zip code and unfortunately there was nothing that could change that rate. They disconnected that call and found a cheaper insurance company and switched. (Damn, lost another one)

4. Credit Score...I know! Most drivers wouldn’t think that your credit score would play a part in calculating your insurance premium but there are some insurance carriers that due use that as a determining factor in calculating your insurance rate. I know what you are thinking,

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"Why use my credit score?” The obvious reason would be, “If I don’t pay my bills on time, than I won’t pay my car insurance on time.” Although that does make sense, that is not typically the reason insurance carriers use your credit history. The insurance companies use you credit history because some statistics show that people with high or higher credit scores tend to be better drivers, pays bills on time and avoid insurance lapses. It’s just that simple. No worries, I have a few credit-fixers in the Roladex. (Showing my...don't judge)

5. Education/Occupation. Insurance companies tend to use your Education and Occupation in determining your insurance premiums when you are a new customer/policyholder. Your level of education is used the same way your credit score is used and your occupation could also be used in the same fashion. Statistics show the higher the level of education completed, the better the driving history. Statistics also show drivers with a higher paying job, tend to be better drivers. In some cases a police officer/firefighter will ultimately pay a higher premium than a lawyer or a judge.

Take these gems and impress your current or future auto insurance carrier with your knowledge of insurance. When you shop for different insurance rates, remember to ask the sales person, the right questions to obtain the best rates. If not, it's cool-Lucky for you I have a few tips/tricks for lower insurance premiums but that is another story...literally! (Lowering Insurance rates post coming soon)