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What affects the cost of auto insurance?

The deciding factor in determining how high or low your insurance premiums will be is whether or not an insurance provider views you as a low risk or a high risk motorist. A low risk motorist will receive low rates, and a driver who is considered to be a high risk will receive higher rates. From an insurance provider's point of view, you will be forced to pay money if a motorist you have insured is involved a collision. If you have an option between a single motorist who has had two speeding tickets and one accident and another married motorist who has a clean driving record and a history of maintaining coverage, which would you choose to extend lower rates too? The answer would be the motorist who will seem to cost you less money in the long run. The history of a motorist who has accumulated a number of tickets or previous collisions will serve as an indicator that he or she will have a higher probability that of future loss for the company. Thus insurance providers opt to charge higher rates in a higher risk situation as a way to cover themselves in the likelihood of an accident.

As insurance companies have evolved, they have developed a complex formula that is utilized in determining the premiums for a motorist. When you fill out a car insurance quote, you are asked to answer a series of questions about your personal statistics, your vehicle, and the coverage you desire. Each of your characteristics is assigned a risk value. The sum of these risk values is then weighted against the national claims average of motorists who share your characteristics. This information is then used in determining your rates. For example, single males under the age of twenty five are among the most expensive groups of motorists to insure. Statistical data has proven that this particular group of motorists is less likely to heed local traffic laws and is more likely to take unnecessary risks that may result in an accident or claim. Similarly, married middle aged females are among the cheapest groups of motorists to insure.  This is because most of these women have families to worry about, making them less likely to be dangerous on the roads.

Each insurance company possesses a unique history of financial loss when it comes to particular groups of consumers. The ultimate goal of an insurance company is to accumulate more in premiums from a motorist than the company will likely have to pay out in losses. The difference between what is received in premiums and what is paid out in losses is what the insurance company makes in profit. An insurance company's financial history with a particular group of consumers will impact the rates that that demographic will have to pay.  

There are numerous insurance providers who actively pursue motorists who are considered to have a low risk factor. The company assumes that they will have a greater likelihood of profit from conducting business with this group. However, there are insurance companies who market themselves to high risk motorists because they believe that this market will be more lucrative with their business tactics. In order to find the most affordable rates for yourself, you should use online price comparison techniques to receive an affordable quote on your car insurance.


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