Understanding The Premium: What Auto Insurance Companies Consider
It is generally understood that auto insurance premiums will vary among different customers. However, it may not be clear to potential customers why this price difference exists. In truth, there are several deciding factors the insurance company must take into consideration when determining the customer's premium. Having a decent understanding of why insurance companies may charge higher premiums for varying customers is a helpful tool for drivers to better understand their bills.
One important factor that often decides the amount a customer will pay for their premium is where they reside. Those who live in cities, for instance, may be considered a higher-risk customer due to larger numbers of traffic-related incidents. The larger and more dense the city, the more likely an accident or break-in will occur, and therefore, the premium would understandably be higher. The neighborhood one lives in may even play a factor in the cost of the premium as some will have higher rates of crime or be more prone to traffic accidents. Customers who reside in a more rural area will most likely enjoy a lower premium as the risk factor is typically seen as much lower in such locations.
Another factor that plays a large role in the cost of a customer's premium is the driver or drivers themselves. Those who operate the automobile will be reviewed in terms of driver history. Drivers who have previously had traffic-related accidents will be considered a higher-risk customer while those who have never been in an accident will be seen as a low risk to the insurance company. Infractions such as speeding tickets and more serious transgressions such as DUIs and DWIs will also influence the premium as the insurance company must determine driver risk based on driver history. Age is also looked at as younger drivers will be seen as a greater risk than older, more experienced drivers.
With these deciding factors in mind when it comes to what to expect out of a monthly premium for auto insurance, the customer can have a better understanding of the bill they ultimately receive. It is helpful to understand that though a premium may be higher than what one hopes for, it is in the best interest of the insurance company to account for the deciding factors. The location of the primary drivers as well as their driving history will play a great part in the monthly premium. It is through the examination of these factors that the insurance company is able to provide the best and most accurate level of insurance to their clients.