How Car Insurance Rates Work

March 30, 2017 · Posted in General Articles on Car Insurance 

Many criteria determine insurance quotes. Many people think that rates are set by law and are unable to be changed. Although the methods used by insurance companies are dictated by the states, the rates themselves are not. Insurance companies give different rates depending upon the type of insurance. This is the reason why comparing rates for different companies can save you a load of money in the long run.

How insurance rates are set:

Let’s look at what happens when you submit an application for car insurance. First, you are sorted into an individualized group based on each piece of information in your application, as well as other sources. Once your customized group has been determined, the insurance company calls up the pricing information for that group. Finally, any discounts you qualify for are subtracted from the price, and your quote is returned. The entire process is completed by sophisticated software behind the scenes, based on information you enter online or an agent types into a computer.

Where do all these premiums go?

-seventy percent goes to claims.

-4 percent is the insurance companies profit.

-twenty six percent goes to all other expenses.

Why do insurance companies have different rates?

Each insurance company will have different groups with different prices for each, so the rate you pay can vary from group to group. Insurance companies each have their own claim payments and expenses. They use all this information that you provide to set their rate.

What type of information affects your premiums?

1.Who you are:

-How old are you?

-Gender

-Your Marital Status

-Your Area Code

-Where do you work?

-What is your credit score?

-How long have you been driving?

2.What type of vehicle do you drive?

-Year

-What make is it?

-Model

-Miles per year

-What are the safety features?

-Price

3.What you’ve done:

-Traffic tickets

-Do you have at least a B average in school?

-Let your policy lapse?

-Ever filed any claims before?

-Ever filed bankruptcy

-Any defensive driving courses?

-Have you ever had an accident?

4.How much coverage you want:

-How much medical?

-Do you want rental reimbursement?

-Any roadside assistance?

-Bodily injury and property damage

-What about property damage or bodily harm?

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