An insurance company looks at your complete driving profile to determine what your auto insurance policy will cost. Your driving profile is made up of several factors include your location, age, gender, marital status, credit score, your auto insurance and driving history, along with the vehicle you drive. The less risk you appear to present to an insurance company, the lower your premium will be.
Your driving profile
The amount you pay for insurance is based on a variety of factors. These considerations, which include your location, age, gender, marital status, credit score, your auto insurance and driving history, along with the vehicle you drive, constitute the bedrock of your car insurance rate. The less risk you appear to present to an insurance company, the lower your premium will be.
How old you are
To an insurance company, who you are is determined by your age, gender, credit score, marital status, homeownership, and of course the vehicle you drive. This information, correspondingly, will determine what kind of client you will be to your insurance company. Meaning, they use this information to determine what you will pay for your auto insurance: your premium. If you’re a driver with a low credit score (below 524) or have a lengthy driving record, expect your premium to be higher for what an insurance company views as a risky client.
Your location
Although you might not know it, your insurance is regulated by your state and priced based on the ZIP code in which you reside. If your state requires your basic minimum coverage to be high, you’ll probably face higher costs, as you will be required to meet this requirement. This is one reason car insurance in Michigan is so expensive. Because Michigan is a no-fault state with lofty PIP insurance requirements, residents are forced to pay more for auto insurance than drivers in other states. At a more granular ZIP code level, if there are a lot of bad drivers in your area, your rate could be higher than average because of what your insurance company sees as increased potential for accidents and a greater probability of claims payouts.
Your insurance history
Insurance companies not only want to see that you have an insurance history, but that you have a good history. Unless you’re a brand new driver, a lack of an insurance history is a red flag to an insurance company. Moreover, it’s also the same if you have a long history of only having the bare minimum of coverage. This is because insurance companies see drivers with a long history of high insurance limits as financially responsible and therefore a lower risk than a driver without a positive insurance history.
Your car
To put it simply, your insurance company assumes a portion of financial responsibility for your vehicle when you sign your policy. On average, vehicles with high MSRP (manufacturer’s suggested retail price) such as Mercedes-Benz models or BMWs are more expensive to insure in than something like a Honda CR-V. This is due to these luxury vehicles’ more expensive parts. If you own a high-performance vehicle, expect your premium to reflect the added potential expense faced by an insurance company.
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