Car insurance companies will analyze multiple factors, before granting coverage to someone. All of these factors will contour a person's risk profile, which is the probability of him making a claim or being involved in an accident in the near future.
The main factors that determine car insurance rates are the following:
- The vehicle and its safety rating. Vehicles with high safety ratings will help drivers pay lower premiums. The safety ratings are based on factors like the likelihood of a vehicle to be involved in an accident and how likely a passenger is to be injured in an accident. Also, safety devices will make the car safer and lower insurance rates. To find out about the safety ratings of a vehicle, policyholders can check the websites of IIHS and NHTSA.
- The driver's credit score. In most states, insurance companies are allowed to look at drivers' credit scores in order to determine their insurance rates. Only persons with an excellent credit score will get the best rates, so even having a good credit score is not enough.
- Address demographics. Insurance companies will be interested in how densely populated is the area, if the traffic is heavy and often congested, car theft reports, road infrastructure, unemployment rate, number of claims in the area, and number of lawyers in the area.
- Driving experience. First-time drivers will always be charged higher premiums. The insurance rates will become lower after several years of driving.
- The insurance policy itself. Depending on how much coverage and how many add-ons are added to the policy, the policy can be cheap or expensive. Policyholders should apply only for policies they actually need.
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