Category Archives: Automobile

Rating Auto Insurance

Every state requires that a vehicle owner show that they have proof of financial responsibility for an accident they cause.  This can be handled by posting a bond, but typically owners apply for insurance coverage.

There are two important types of risks that every vehicle owner must consider: 1) your liability for injury and property damage to others and 2) damage to a vehicle that you own.  When an insurance company determines how much your premium will be they look at a variety of factors to determine the probability that you will be involved in an accident and if so the cost to the company for damage to your vehicle and the other party(ies) involved.

Some of the factors that influence your premium include but are not limited to:

  1. Coverage limits and deductibles – Higher limits for liability and property damage will increase premiums.  A higher deductible typically results in lower premiums.
  2. Vehicle usage – Average drive distance and how far the vehicle is driven in a year have an affect on the probability of the vehicle being involved in an accident.
  3. Where the vehicle is parked and driven – parking and driving in urban areas tends to raise the probability of a claim
  4. Driving record – drivers with a history of tickets and accidents present a greater risk to the insurance company.  While the cost of a previous claim may be of interest to a carrier they usually more concerned about the number and frequency of incidents.
  5. Demographic factors – These include things such as age, sex, and marital status.  Your state may limit what demographic factors the carrier uses, but there are ways the carrier can attempt to get around these limitations (see number 6).
  6. Credit score – . Studies have shown that credit history is a powerful predictor of future auto insurance losses, and so your score is one of many factors that insurers might use to calculate risk.
  7. The vehicle you drive – data from claims and crash reports are used by carriers to determine a safety rating for your vehicle.  Carriers will also look at how expensive your vehicle is and the typical costs to repair crash damage.

In future posts we’ll discuss how you can control some of these factors in order to obtain the best coverage for your premium dollars.  If you would like assistance with your auto coverage please contact one of the insurance professionals  at Jerry Hay, Inc.  We will be happy to assist you in any way possible.