15 Sep 09 How Rates Work For Car Insurance

Many factors will determine what premium rate you see when you ask for quotes. A common misconception is that rates are set by law and cannot be changed. Although the methods each auto insurance company uses when setting rates are regulated by state laws, the rates themselves are not set by the state. This fact means that there will be different rates for each company. Once you understand more, you’ll see why comparing rates from different companies can save you alot of money.

How they set your insurance rate:

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?

-70% goes to claims.

-four percent makes up their profit.

-The other 26 percent is for other expenses.

Why do they have different rates?

Each company has different categories with different prices for each, so rates can vary considerably from group to group and company to company. Each insurance company will have their own set of expenses and claim payments. They set their rates based on all this information.

What info can affect your insurance premiums?

1.Who you are:

-Your Age

-Your Gender

-Are you married?

-Zip 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

-Make

-Model

-Annual mileage

-What are the safety features?

-How much does the car cost?

3.Your character

-Traffic tickets

-At least a B average in school

-Let policy lapse

-Ever filed any claims before?

-Ever filed bankruptcy

-Have you ever taken a defensive driving course?

-Any accidents?

4.How much coverage:

-How much medical?

-Do you want rental reimbursement?

-Roadside assistance

-Comprehensive and collision

-What about property damage or bodily harm?

Matt has been an insurance agent for 15 years and writes for EquotePro.com as a hobby. You can read his other articles or get auto insurance quotes with no obligation.

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