Working in the financial Industry and speaking to several Insurance agents & brokers; we have determined the seven factors that have an impact on your insurance premium.
Let’s start with the basics of what an insurance company is; an insurance company is an entity like any business that determines their prices based on the amount of risk they’re taking by Insuring a driver(s). Here are the seven factors that determine the risk & pricing for the Insurance premium:
Your driving history is the primary factor that determines what your premium will be; if you just got your license, then you’re premium will likely be higher because of the liability you are to the company; however, after two years of experience many companies will offer you a discount for staying loyal to the company and maintaining a clean record. Clean record means: no accidents, tickets (such as speeding, or traffic related), or DUI’s (driving under the Influence; marijuana, alcohol, or any drugs that impair your ability to drive).
If you’re driving an exotic luxury car, expect to pay more! Why? let’s say that you’re driving a 2015 sporty vehicle worth $50,000 and you crash Mr. James’ who drives a car worth $5,000; your Insurance company would have to pay the $50,000 plus whatever damages occur while your were driving, because the Insurance company has to take the risk of Insurance you for a large amount; the premium will be a lot higher than the premium of Mr. James who drives a $5,000 car. Moral of the story; the more expensive your vehicle is, the more you will pay.
Insurance companies will ask you before getting a quote, “Is your vehicle for: pleasure, business, or work?” following with “How many miles do you drive to work and back?” based on these two questions, the Insurance company will determine the amount of risk you are as a person and give pricing accordingly. If you drive more, you’ll pay more.
Place of Residence
Factors such as crime, and theft have an Impact on the rate of an Individual. For example, if you live in an area with low crime rates, your premium will be affected by this factor.
If you’re younger than 18 years of age and just started driving, you’re considered a bigger risk to an insurance company; therefore, you will pay more or less, depending on your age.
Insurance companies use statistics as part of determining the premium cost; according to the statistics, male drivers have a higher rate of liability because men tend to speed and be more reckless than women; while women are viewed as less of a liability because of their lower rates in accidents and less likely to speed.
For many companies, your creditworthiness is a symbol of how responsible you are and the liability you are to the Insurance company.
The next to see a significant change in your insurance premium consider any of these seven factors and if you have any questions regarding this topic money.com is a great source to be educated on this topic.
Barron Income Tax