How are car insurance rates determined?

There are more than 2 dozen factors used to determine what the rates will be on a car insurance policy. It might be easier to explain if we break the factors up into main groups such as history, usage, location, and drivers.

For car insurance, history includes the driving history of all drivers on the policy, but it also includes the credit score of the owner of the policy. Insurance companies want to know whether you can be depended on to follow your end of the contract, and your credit score and history are an indicator of your financial stability. A lot of activity in your driving record or a low credit score will both entail higher rates on your car insurance premiums.

To determine the usage, the insurance company will need to know what kind of car you are insuring, how often and how far the vehicle will be driven, what it will be used for, and how many vehicles you own. The risks involved differ from person to person and car to car. Even the number of doors the car has will affect the premiums. For example, a sports car that is only driven on weekends will not usually cost as much as a sedan that is driven 100 miles every day. A car that is used as part of your job will be far more expensive to insure than one that is parked during working hours.

Where you live plays a factor in the risks involved as well. Densely populated areas are a higher risk. Additionally, where the car is parked when it is not in use is important too. If you park your car on the street, it is much more likely to be involved in a hit and run or burglary, where a car that is parked in a garage at night is safe from most dangers, including vandalism.

Who will be driving the car is one of the most important factors of insurance cost. The age, gender and marital status of the policyholder and all drivers on the policy will affect the cost, but even such considerations as the occupation and education level of the drivers will also be considered.