Factors That Determine the Price of Your Auto Insurance Policy

Insurance companies use a variety of factors to determine auto insurance rates. The price often depends on several aspects that most auto insurance companies take into account. Here is a list of the things that most seriously affect the amount of money each driver in the U.S. spends on insurance.

How Cars Affect Auto Insurance Rates

Most people do not even think to check the insurance rates for a car before they consider an auto purchase. This is unfortunate because drivers can save money by simply verifying the auto insurance rate before purchasing a car. It is also important to note that if a driver owns a brightly colored sports car, the rates will be higher than for a family van or a four-door sedan.

How Age Affects Auto Insurance Prices

Typically, teens and seniors pay higher rates -- mainly because these groups are more prone to accidents than other drivers. A 2006 report that focused on elderly drivers noted that fatalities rose by seven percent from 1981 to 2000. The report, which was written by Fred Mannering and Samantha Islam of Purdue University and published in the Journal of Safety Research, also concluded that this did not mean elderly drivers are worse drivers, but rather that they are more susceptible to car accident injury and fatality. Younger drivers, 15 to 24 years of age, are prone to speeding and/or driving while intoxicated. Unfortunately, age is something that one cannot control. Unless a young driver is willing to wait to own a car, he or she will always have a higher rate.

Mileage and Auto Insurance Policies

The more time a person spends on the road in a year, the higher the auto insurance rates will be. Most of the auto insurance companies will charge a higher rate for frequent commuters compared to other drivers, because the likelihood of being involved in an accident is higher.

How Location Affects the Price of Your Auto Insurance Policy

If a driver lives in the city, then his or her insurance rates are more likely to be higher than a driver who lives in a rural area. Cities generally have more traffic than other areas in the U.S. Where there is a higher density of cars, there will be more accidents. Rates can also vary quite considerably from state to state. New York, New Jersey, Massachusetts and Washington D.C. have the highest insurance rates in the country compared to other states.

Driving Records and Auto Insurance Rates

The more times a person has been involved in an accident and/or has received a ticket for a speeding violation, the higher the insurance rate will be. If a driver's record is clean, then he or she may be eligible to shop for insurance in the preferred auto insurance market. The preferred insurance market rewards good drivers by allowing them to qualify for lower premiums. Drivers with good records should consult their auto insurance company to negotiate a lower rate.

How Credit Histories Affect Auto Insurance Rates

More and more auto insurance companies are looking at customer credit histories in order to determine an appropriate rate. A study conducted in 2003 by EPIC Actuaries, based on a nation-wide sample of two and a half million automobiles, showed a high correlation between people who have bad credit and filed claims.

No one factor alone determines a driver's auto insurance rate. Drivers should always know which factors are under their control and then do their best to limit any liability that may result in rates that are higher than normal.