What Factors Determine Car Insurance Rates?

When you’re shopping around for an auto insurance provider, you may wonder how auto insurance companies come up with different rates. Since the law requires you to have auto insurance coverage, knowing what factors determine insurance rates may prove helpful to you. Some of these are readily apparent. For example, it’s not hard to understand why insurance rates for a new driver are higher than for a more experienced driver. But there are other factors that you may not be aware of, and these will be discussed below.

How's Your Credit Rating?

Surprisingly some motorists are not aware that their credit rating plays a part in the auto insurance rates that they get. If you have a good credit history, you will be able to obtain lower premiums than if you had a poor credit rating. Fair or not, consumers with poor credit reports are regarded as higher risk because of their perceived lack of responsibility in managing their finances. If your credit rating is a problem, then improving your credit score is the first thing you should do if you want lower auto insurance premiums.

What Safety Features Does Your Car Have?

Some motorists may not realize it but a car's safety features is also taken into consideration when auto insurance companies draw up their rates. Different types of vehicles have different manufacturer-installed safety features. On the whole, your car insurance premiums will be lower if you have more safety features. And one model of the same make of car may have more safety features compared with another model; also, a base model may have only the minimum number of airbags, compared with a more expensive model. Other safety features include anti-lock brakes, tire pressure monitoring systems, etc.

What Type of Vehicle Do You Drive?

Many people know that the kind of vehicle they drive is one determinant of the car insurance rate. Conventional wisdom tells us that a sports car would most likely be driven by one who is likely to disregard speed limits, while a family-type vehicle (such as a station wagon) would probably be driven at safer speeds. Also, bigger vehicles would be considered safer than a compact or subcompact. Certainly the type of vehicle you own will affect your car insurance rate.

No doubt there are other factors that an auto insurance provider will take into consideration in determining your insurance rate. These three, however, are the most important and should be given due attention if you are looking to get the most affordable auto insurance coverage.