Risk Factors and its Effects on Car Insurance Premiums

by Bianca Villares


The premium that drivers pay for auto insurance depends on certain factors, specifically called risk factors. Based on previous driving records, miles driven per year, age, etc, a driver’s risk factor is evaluated and is directly proportional to the insurance premium he or she must pay.

To make sure you pay the lowest premiums possible, think about these factors and what you can do to make them advantageous for your situation:

Driving Violations and Accidents
Insurance companies have one thing in mind: a significant number of accidents or moving violations equals to greater accident risk. Some insurance companies even penalize drivers with a bad record, which usually lasts for a number of years. Bottom line is, the more driving violations you have, the higher the premium. If you want your premiums to decrease, keep your record clean.

Vehicle Type
This is where insurance companies and car owners understand each other’s demands. Car owners of the latest, most expensive models usually get insurance with better coverage, which means higher premiums. Cheap cars cost less to insure because car owners have the option to disregard other types of coverage that are not applicable to their vehicles.

Occupation
No, they don’t check your salary. Not yet, at least. For insurance companies, a significant relationship exists between the business use of your vehicle and the premium you must pay. If your job description includes long hours of driving such as being a door-to-door salesman, expect a higher premium.

Credit Rating
A better credit rating will save most drivers from higher premiums since many insurance companies believe that poor credit history is susceptible to higher risks.

Geography
The place where you reside can also dictate your insurance premiums. Living in congested cities or areas with a lot of traffic prone to vehicular accidents raises the risk factor of drivers. High crime rate, specifically of vehicle thefts, also leads insurance companies to charge higher premiums.

Education
Drivers with higher educational attainment are charged with lower premiums.

Others
Years of driving experience, lower miles driven each year, theft protection devices and multiple cars and drivers also offer opportunity for premium discounts.

Some factors which cannot be adjusted, such as age, gender, and marital status can also affect a driver’s risk factor. Most insurance companies see drivers under the age of 25 with higher potential risk of being in an accident. Women are also considered as safer drivers than men, while a married person has lower premiums compared to a single one with the same driving record.

By calculating your risk factors, you can easily get lower premiums which could save you a lot for the years to come. Just remember though, each insurance company has a different take on insurance premiums, so it’s always best to compare the rates of multiple companies for your particular situation.