What Determines the Price of My Auto Insurance?

Auto insurance price determination

Auto insurance price is determined by many factors. Rates can be an expensive part of your monthly budget.  It is important to strike a balance between the amount of coverage you need versus the amount of coverage you can afford.  Part of making informed decisions about your coverage is understanding what the insurance companies take into account when deciding on your rates.  If you are a Casa Grande, AZ resident shopping for auto insurance, make sure you know the items insurance companies may be looking at when determining the your premium rates.

  1. Location, location, location: Where you live can impact your auto insurance rates. If the area you reside in has high rates of crime such as property damage, vandalism and car theft your rates will be much higher than if you reside in a relatively crime free area. The insurance companies look at statistics and percentages, and if you live in a high risk area you are statistically more likely to file a claim.  To protect themselves financially from this risk the insurance companies will increase your premiums to cover their potential losses.
  2. Previous claim history: Insurance companies can and often do lookup our previous claim history using a database called CLUE. CLUE stands for Comprehensive Loss Underwriting Exchange.  A CLUE report, “provides a seven year history of losses associated with an individual and his/her personal property. The following data will be identified for each loss: date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.”  The CLUE report shows all claims filed regardless of your insurance carrier at the time of the claim.  Insurance companies can use this information to see if you have filed multiple claims and if the claims were paid or denied.  You are far more likely to receive lower auto insurance rates if you do not have any claims.  If you are unsure of what might be on your CLUE report you are entitled to receive 1 free copy annually.  Casa Grande residents can request a copy of this report by completing the necessary form and sending it by mail to:

C.L.U.E. Inc. Consumer Center
P.O. Box 105295
Atlanta, GA 30348-52

  1. Credit: While your credit score typically demonstrates your credit worthiness and ability to pay your bills on time, this information is also being used by auto insurance companies. One car insurance company might weigh your credit score differently than another or not at all; but it is quite common for your credit score to be taken into account when determining your insurance rates. While this is not the only factor taken into account, a low credit score can certainly increase your premiums.  If you are shopping around for car insurance consider what you may be able to do to raise your FICO score.
  2. Age and gender: Those pesky insurance companies rely heavily on statistics to determine the cost of your car insurance. DMV.ORG, explains in detail how your gender can directly affect your auto insurance rates, “Starting from the time they begin driving, women generally pay less than men do for car insurance. This pricing gap is influenced by:
  • The types of cars typically chosen by men.
  • The frequency of accidents among women versus men.
  • Gender-based statistics on risky driving behavior.
  • The average number of miles driven by women vs. men.”

All these factors are taken into account; and generally speaking women will simply pay less than men in insurance premiums.  Also, if you are a very young driver your rates will be affected negatively.  The statistics show that young drivers are involved in more accidents and consequently they pay much higher insurance rates. If you are a male Casa Grande driver under the age of 25 you are probably paying higher rates than your female counterpart.

  1. How much you drive: How many miles you drive is another statistical factor insurance companies may take into account. According to Obrella.com, Casa Grande is #13 in overall best commuter cities and, “Roughly six out of 10 Casa Grande residents enjoy a drive to the office that’s less than 15, and eight in 10 get there in less than 29 minutes.” There are many employers with jobs for local residents available in Casa Grande.  This helps keep the total commute time short for many.  However, if you are a Casa Grande resident and you are commuting to downtown Phoenix or Tempe, expect your car insurance rates to be higher than your neighbors who work locally.  The more time you are on the road, the higher the likelihood of an accident.
  2. The car you drive: The type of car you drive can directly affect your insurance rates. If you drive a car that is frequently stolen, this may increase your premiums. Luxury vehicles and sports cars can also increase your rates.  Luxury vehicles are typically more expensive to repair while sport car owners are more likely to be in accidents.
  3. The type of insurance and coverage amount: The more comprehensive insurance you have the more you will have to pay for it. Some people have only liability insurance and that will generally be significantly less than someone who has full coverage.  (Consult with your insurance expert before opting for only liability insurance).  Also, if you opt for higher coverage amounts it will probably increase your rates.  The more money that the insurance company could potentially have to pay, the more they will charge you in premiums.

Auto insurance is, at its core, based on statistics and numbers.  If you need auto insurance be sure you know how the numbers likely affect you and work with an agent to get the best rate possible and the coverage that you need.

 

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Steve Gebhardt

Gebhardt Insurance Group was honored by AAA Insurance for being the top New Policy Agency in Arizona for 2013 and achieving the "Emerald Achievement Award."

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