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Car Insurance Rates 101

You may feel that a car insurance company sets its rates by throwing darts at a dartboard or consulting a Ouija board, but that's not the case.

In fact, auto insurance companies rely on sound statistical data - compiled and tested over decades - to determine the fees it charges its individual customers. Insurance is all about risk, and few understand how to assess risk better that insurers.

Auto Insurance Rates: How They're Determined

A car insurance carrier considers many factors when evaluating risk, including:

  • Age.
  • Gender.
  •  Location.
  • Vehicle type.
  • Marital status.
  • Accident history.
  • Driving record.
  • Annual mileage.
  • Credit score.

These factors help insurers form a composite look at their customers, and evaluate which ones are most likely to cost them money through higher-than-average claims rates. Those deemed most likely to file a claim from an action they caused get tagged with higher insurance premiums.

Like it or not, that's how the system works.

Who Gets the Cheapest Car Insurance Rates?

Generally speaking, insurers offer cheaper car insurance rates those who:

  • Are female.
  • Are over 25 years old.
  • Are married.
  • Drive an older, less expensive car.
  • Drive a car with a good safety record.
  • Live in a rural area.
  • Have no chargeable accidents.
  • Have no moving violations.
  • Drive fewer than 10,000 miles per year.
  • Have a high credit score.

Drivers with these characteristics have been shown to - on average - cause fewer accidents, report fewer claims, and cost insurers less money. That's why those who fit into most of these categories pay a cheaper car insurance rate than other drivers. 

However, insurers don't weigh these factors equally. For instance, your driving record, age, and gender are more important than your marital status or credit score.

How to Lower Your Car Insurance Rate

When it comes to lowering your premiums, you have a lot of options.

Not all of the following actions may be feasible or possible for you, but they can have a positive influence on the price you'll pay for insurance:

  • Increase your deductibles.
  • Lower your maximum coverage limits (be careful with this).
  • Take a safe driving course.
  • Maintain a high grade point average.
  • Have the newest safety features in your car.
  • Drive a vehicle with a good safety record.
  • Improve your driving record.
  • Have fewer chargeable accidents (i.e., accidents you caused).
  • Move to a more rural location.
  • Drive fewer miles.
  • Raise your credit score.

Your insurance agent or insurance company may offer other ideas on how to lower your auto insurance rates.

Compare Car Insurance Quotes

Even though car insurance companies tend to think alike, the prices they charge for coverage can vary tremendously.

That's why it's smart to compare your insurance rates with several carriers. You can quickly do this online; in fact, some sites permit you to view from numerous providers at once.

Just keep in mind, though, the company with the most attractive rates may not always be the best option for you.

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