Factors that affect insurance premiums

Several factors are taken into account when calculating the insurance premiums paid by individual companies. These factors vary depending on the jurisdiction and local laws of the area. The main source of the basis of insurance premiums paid is based on several factors that have been calculated.

The first of these factors; and sometimes the most crucial; is the age of the driver. The age of the driver has a direct impact on the insurance rate that the person may be charged. Statistics have shown that younger drivers are careless and inexperienced. This actually makes them high-risk customers and their premiums are higher, unlike the older group of drivers.

The vehicle being driven is also another crucial factor to consider. A very fast, high-spec sports car typically costs more; as opposed to a small car with a smaller engine. This is because the sports car has a higher chance of being involved in an accident, compared to a smaller specification vehicle.

In some cases, gender has been used as a factor to determine the rate of premiums paid; although it has received serious opposition from women. Statistics show that female drivers are involved in more accidents than their male counterparts; this is why some companies charge women more, because of their increased risk of being involved in an accident.

If you are married, you will in most cases pay a lower premium; unlike other individuals who are single. Statistics have shown that married people are less likely to be involved in accidents; and if they are included in the equation, this calculation places them as low-risk customers; so they have to pay much lower premiums.

Some insurance companies have started a trial of insurance coverage based on the distance the vehicle travels. This is a product mainly marketed to people who rarely use the vehicle and do not travel much. The ability to be insured for the distance they travel translates into lower premiums if they cover shorter distances; as opposed to drivers of vehicles traveling longer distances.

Credit history can also be a factor used in determining insurance premiums paid. According to the system, drivers with high credit ratings receive lower premiums because they are viewed as lower-risk customers than those with low credit ratings.

See also  5 basic insurance mistakes you should avoid