Auto Insurance Rating Variables

When it comes to auto insurance & determining rates, there are a few things that go into it. The way insurance companies determine an individual’s premium is through auto insurance rating variables. These rating variables are characteristics that are unique to the person wanting the policy – these characteristics help determine risk. The higher the risk, the higher the premium. Lower risk means a lower premium.

Let’s go through some of the common auto rating variables:

Common Auto Insurance Rating Variables

Age

Insurance companies use your age in their overall rating algorithms. Drivers who are under 25, and over 65 typically don’t get preferred rates. Why? Well, because statistics show that those two age demographics are more at risk for financial loss due to an auto accident.

Credit

Credit is a metric that has been used in insurance scoring for many years. The better your credit, the more favorable your rates will usually be. If you are not sure what your credit is, no worries! Insurance agents do a soft pull of your credit score when giving out quotes.

Car

The type of car, engine size, safety features, etc. are all part of determining your rate. For example, let’s say you had a 2010 Ford F-150. You trade in the truck and purchase a 2022 F-150. You look at your auto insurance and it went up. Why is that if it is the same model with similar features? Well, newer cars are typically more to insure due to the cars’ overall worth. It would cost more money for replacement costs essentially.

Driving History

Your driving record and loss history plays a substantial role in the price. If you have a spotty driving history or multiple moving violations or accidents, chances are you won’t get a preferred rate until those things are at least 3 years old.

Household

Insurance companies underwrite at the household level. This means they try to judge based on the entire household what the probability of loss will be. If there are multiple drivers in the house who are under the age of 25, that will impact everyone’s pricing in the household.

Auto Insurance Rating Variables Recap

A lot of the above variables are things you can’t change or shouldn’t change when it comes to auto rates. However, there are things you can do to lower your auto insurance rates, here is another article we wrote called “8 ways to save on auto insurance“. If you have any other questions about auto insurance or rating variables, let one of our team members know. Reach out to us at team@thamsagency.com.