Considering automobiles are very expensive goods and very susceptible to risks such as collisions, theft and vandalism, having your car insurance is a very responsible thing to do. Auto insurance companies work by calculating the probability that its customers’ cars will be damaged in any way, and asking for rates that, added, will cover all the payment it’ll have to make.
In order to do that, many things have to be taken in account – that is, all factors which make it more or less likely for something to happen to your auto, and this makes insurance quotes vary wildly from an individual to another (so make sure you check the cheapest auto insurance). In order to understand how it works more deeply, we’re going to analyze the main factors that are usually taken into account.
First of all is the most obvious – your MVR, which stands for Motor Vehicle Report. The MVR is, in short, a driving record, which details all accidents you were involved in, as well as any kind of violation. Since being a bad driver considerably raises the chance of having a car accident, a bad Report causes your premium to be much higher.
Another heavily impacting factor is your age. Usually, when you’re under 25, the company considers you a very inexperienced driver, and therefore believes you’re more likely to cause some sort of accident. As a rule of thumb, the older you are, the less it will cost.
Your location also plays a huge part into calculating the risks for your auto, and therefore your insurance rates. Some locations are notorious for having lots of traffic and often being site to accidents, while others are historically more violent and prone to robbery and theft. Population density is also considered, since its much more likely for an accident to happen on a highly populated city than in a small rural setting.
Other less intuitive factors are gender and marital status. Despite what popular culture claims, since men tend to be more reckless and less careful, they are considerably more likely to be involved in an accident than women, to the point that the companies tend to charge higher for male. Similarly, single drivers tend to crash more often than married ones.
The pricing also varies, of course, by insurer. Although all companies are trying to balance risk and price, they all do it differently, due to their own formulas and data. A certain company, for instance, might consider your gender much more of a risk factor than it considers your age, so a young woman’s quote would end up being less expensive than an old man’s, while another would think being young and inexperienced is much more risky than being a man, and therefore charge more for the old man than the young woman, given that other variables are similar.
Lastly, some factors don’t depend on you or your behavior, but on the vehicle you drive. Performance on crash safety tests is very important for the rates’ decision, and even the size of the car can influence a lot in it – since bigger cars are harder to control well and more valuable.