Car Insurance: What Determines Your Premium Rate
Are you one of the many people who feel that what you are paying for car insurance is probably too high; but you just have to pay, since car insurance is a statutory requirement in most legal jurisdictions before you can put a car on road? Have you always wondered why it is that you are charged so much on car insurance, whereas nearly everyone that you talk to seems to be charged what turn out to be considerably lower car insurance premiums? We attempt to answer that question for you here.
To understand why it is that car insurance premium prices vary from person to person, we have to appreciate the basic fact that insurance is supposed to be a ‘hedge’ against the risk of car accident (and perhaps car theft and similar risks). Now in working out what to charge the various people who seek to buy car insurance from them, car insurance providers try to work out what the probability of the different people suffering the different events they are insuring against, especially the road accidents is, with the people who are at a higher risk of suffering from the same being charged for more car insurance than people who are at a lower risk of suffering the events they are taking car insurance against.
In working out your risk profile - the primary factor that goes into determining the rate at which they offer you their products at - car insurance providers look at a number of factors.
Your road-usage record, and conduct with regard to the ‘highway code’ is one of the factors that car insurance providers look at in working out what to charge you. If you have a record of being ticketed almost every month for one or another road-usage offence, it should not come as a surprise when you find your car insurance bill getting higher every passing year, while people with better ‘road usage’ records get charged lower car insurance premiums.
If you drive a car whose model has been associated with a higher frequency of road accidents or more gruesome road accidents, chances are that you will have to pay higher car insurance premiums than a person driving a ’safer’ car - all the other factors held constant. If you drive a ‘high’ risk car, though, but take measures to make it safer - by way of installing air bags, anti-lock brakes and so on, you could find insurers more willing to offer you car insurance at better rates.
A driver’s age, too, is another factor that car insurance providers take into consideration in working out car insurance premiums. With regard to age, younger drivers (and young here typically means bellow 50 years of age) are typically charged more in terms of car insurance premium than older drivers, since it has been observed that younger people tend to be more accident prone than older folks.
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