Even if you've been driving for many years, you may not know as much about your auto insurance company as you think you do. When shopping for auto insurance, it's valuable to know how carriers operate and how they determine your rate.
- Your Credit History: Most know that auto insurance companies evaluate a potential policyholder's driving record. But you may not be aware that they also pull a credit report and take a look at your credit score and history, which can be a factor when determining your rate. Insurers believe that the better your credit history, the less likely you are to file a claim – and the more likely you are to make your premium payments on time. Be aware that if you've always paid your bills on time but paid them in cash instead and have no credit history to speak of, that's not a plus.
- Your Driving Record: Typically, auto insurance companies have the right to review the driving record of anyone who applies for a policy from that company. The company wants to determine whether you meet their standards of insurability and to evaluate your risk potential. Each company has its own evaluation method, so the points on your driving record may or may not have a direct impact on your rate.
- The Type of Car You Drive:
- Sports Cars: Auto insurance companies will classify sports cars and other flashy, high–performance vehicles as high risks, because statistically their owners tend to drive more recklessly than people who drive sedans and station wagons. What's more, these types of cars are tempting targets for thieves and vandals. If you own such a vehicle, be prepared to potentially pay a substantially higher premium.
- Sport Utility Vehicles: Aside from the higher cost to repair some SUV models, which raises auto insurance rates, there is another reason why these types of vehicles are unpopular with insurance companies. Pedestrians hit by SUVs have a 300% higher risk of serious injury than if they were struck by a passenger car. There's also greater injury to people in cars hit by SUVs as compared to other cars. As a result, SUV owners typically pay 10% to 20% more for car insurance.
The more you know about auto insurance companies and how they work, the better prepared you'll be to understand car insurance rates.
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