Auto Insurance Rates – un mal necesario?

Like most other financial service businesses, insurance companies use a common denominator called “risk” to determine rates. Think of it this way. Your friends and family asked you to borrow money. To whom and how much would you lend to?

Are you trying to determine who will pay you back?

You are now trying to predict the risk of lending money and getting paid back. Insurance companies use risk-based rating factors to determine what your rate will be.

Insurance rates are regulated by State Departments of Insurance. However, insurance companies are allowed to use numerous rating factors to determine risk. Below is a list of a few factors commonly used:

Type of Vehicle – It generally goes without saying; the more expensive the car, the higher the rate. But did you know that vehicles with higher repair costs (based an average costs of parts and labor) can negatively impact your rating. Likewise, automobiles that data prove are involved in more accidents (i.e. sports car vs. family van) can increase your risk scores.

Driving Record – Simply put, the more accidents, tickets, and claims you have, the higher your insurance rate.

Age – Generally, the younger the driver, the higher the rate. Typically females under 21 and males under 25 get the highest rates. I suppose with age comes experience. With experience comes safety. So why the difference between males and females…

Gender – Women typically have less auto accidents and tickets than men. But don’t fret, there is something that specifically benefit males…

Marriage –Once again data proves that unmarried males tend to have more accidents than married males. I guess marriage makes us more responsible…naah!

Zip code or Garaging address – Also known as where you live and park your car at night. Areas with high amounts of traffic or accidents can increase rates. Do you really want that highway built near your house? Also, areas with high auto theft crime rates will impact your risk scores.

Policy Limits – Yes, the higher your policy limits, the higher your insurance premium. Of course though, this should not deter you from choosing high limits, because this also gives you more protection and security. Another bonus with Farmers is that your rate per $1000 of liability actually decreases as you increase your limits. Which means higher insurance limits actually costs less than lower limits.

Deductible – The higher the deductible, the lower your insurance premium. If you haven’t been at-fault in any accidents, consider raising your collision deductible.

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