Insurance companies use a variety of rating factors. Every Insurance Company rates a little differently. Anybody that has compared insurance rates with their neighbors, friends or family has noticed car insurance rating can be quite different. You are not going to have the same insurance rates as your neighbor. There are too many rating factors. Here are the primary rating factors for car insurance.
Car Insurance Liability is primarily determined by the driver. The insurance company will look at a drivers age, male/female, driving history (includes tickets or accidents, insurance history and credit.) Liability insurance is focused on the likelihood of damage that you might cause to someone or something else.
The vehicle is also a significant determining factor for liability insurance. Car Insurance companies will use engine size/performance, weight of vehicle and safety ratings are used to determine liability rates for the car insurance policy.
The vehicle rating factors are used to determine the physical damage (Comprehensive & Collision) or the coverage to repair your vehicle if there is a claim. Insurance companies will consider value of the vehicle, size of engine, and how the vehicle holds up when involved in an accident.
Where you live is a significant rating factor. If you live in an area with a higher population, more cars, there will likely be more accidents, which costs the insurance company more money, which means a higher insurance premium. Insurance companies use years of car accident data on territories to help determine an appropriate rating for a particular area. Territories with lower accidents and overall losses will naturally have lower car insurance rates. Areas with more accidents and more insurance losses have higher rates. This is why insuring inside city limits are so expensive. There are more people in a more condensed area; which means more car accidents.
Driving behavior is the rating of the future. Insurance companies are desperately trying to collect this data on individual drivers. The buzz word in the insurance industry is telematics. Insurance companies want to collect how much you are driving, how far you are driving to work, what time of day you are driving, how fast are you driving, are you slamming on your brakes too often, are you picking up your phone when you are driving. These are the variables that are measured when you agree to use the driving monitor program. Insurance companies are trying to buy this information from you by offering a discount. If you have a vehicle that is 2015 or newer, most of this information is already being tracked by your vehicles little black box. Some car manufacturers are selling this information to insurance companies to use for rating. This will be the car insurance rating of the future.