Insurance Rating -- The Big Mystery



Insurance agents do not establish rates.  Let's just get that out first and foremost.  Each insurance carrier (provider) adjusts rates based on the number and severity of claims paid out over a specific timeframe.  Even if you have never filed a claim, your rate can still go up as a result of the increased cost of car parts, labor and repairs.

In addition to each carrier's loss ratio, here are some other factors insurance companies use when calculating your auto insurance rate:

  • Zip Code
  • Gender
  • Age
  • Year, make and model of each vehicle in the household
  • Marital Status
  • Education level 
  • Credit history
  • Occupation 
  • Homeownership - yes or no
  • Driving history
  • Vehicle lienholder information
  • Vehicle Use
  • Number of drivers compared to number of vehicles
Here's an example of how these factors can affect your insurance rate: All other factors being equal, a single, 20-year-old male, with a low credit history (or no credit history), driving a 3-quarter-ton pickup, will likely have a much higher premium than a married, 28-year-old male, with an average credit history, driving a 4-door sedan.  

Some insurance carriers will offer discounts for members of certain professions, including military, educators, firefighters, and more. Others will give you a discount on your auto insurance if you have more than one policy with them. Most will use a credit-based score as part of the rating factor. Others will require odometer information and miles-driven-per-year as part of the application.

When shopping for auto insurance, the Insurance Information Institute (Triple-I) recommends getting quotes from at least three insurance companies (carriers) to get an idea as to what the estimated coverage would cost for your household. Quotes are estimates – not the final price – as information provided for the quote must be verified. The final price or “rate” is adjusted from the initial quote.  From there, you can select the coverage types, deductibles and limits that match your preferences and your budget.

Shopping online is easy and convenient if you understand the different coverage types. Take the time to do a little research; read reviews for the insurance carrier before you commit.  Cheaper insurance can result in sub-standard or "unavailable" customer service, since shopping online saves you money by cutting out the middle man.  The middle man is your friendly, local insurance agent. Also, if you are unsure as to what your current policy covers, take a summary of your coverage and limits (found on the “Declarations” page) to a licensed insurance agent and let them advise you on the next step.  

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