by D. Lowell Brown

Created on: April 28, 2009   Last Updated: April 30, 2009

The answers to this question get less and less specific every year. The auto insurance market is such a competitive arena that companies are constantly coming up with new pricing models. These models are designed to help the company "rate for the risk". Information is gathered from several areas, however, the most important area is still your driving history itself. Lets look at the main rate drivers used today.

Driving Record

Many companies are willing to look past a poor credit score and other requirements if your driving history has been acceptable for an extended period of time. At this point in an auto insurance quote, the company will want to have information on each driver in your household. If just one of you has a bad history, it can raise the rates for everyone, or get you disqualified from coverage altogether.

Insurance History

This is of equal and sometimes more importance than the driving record. If you have been with your carrier for three years or more, it is likely that you are receiving some type of loyalty discount. Also, if you are shopping for a quote, the length of time with your prior carrier will most likely affect your price. If you have been without insurance for over thirty days, your price will probably be higher, if you qualify at all.

Age of Drivers

Because insurance companies want to "rate for the risk", they generalize in some places. Drivers under the age of 21 will see significantly higher premiums than those over 21, all things being equal. Teenage and "youthful" drivers are the cause of most of the auto accidents that occur. Because of this, insurance companies justify themselves in charging the higher premium. Don't worry, as you get older your premium will decrease as long as you have a good driving history.

Location of Car

Live in a metro area? Tough luck for you. Areas with higher population density also tend to have more congested roadways, and therefore more accidents. More accidents mean that the insurance companies have to charge higher premiums to make up for the money they are paying out for claims. Rural drivers typically get a break, although it is not uncommon for their comprehensive or glass coverage to be more expensive than their big city neighbors, since a rural driver has a higher likelihood of hitting an animal or of making a glass claim.

Rent or Own?

Yes, this matters. To an insurance company a renter is less stable financially. This rating factor could quickly go out the window with the current foreclosure mess.

Have other insurance?

Most companies offer multi-line discounts. Having a homeowners, renters, life or health insurance policy with the same company as your auto insurance will lower your auto insurance premium.

Conclusion

These are only a few of the factors that affect auto insurance price. In reality, there are many more. Think of your auto insurance rate as a big mixing bowl, there are many ingredients that give you the final product. There will only continue to be more and more that goes into the rating process as companies search for ways to be competitive.

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