How do insurance companies come up with my rate?

Many of us check our insurance premiums and wonder, how do they come up with my rate?

Do they just come up with a number off the top of their head and you have to accept it?

No.

Insurance companies use different strategies and tools to help them figure out your rate. Some of the information used to come up with an accurate rate is your age, sex, address, vehicle, insurance history, vehicle history, and these statistics call Law of Large Numbers.

They get that info, age, sex address, insurance history, and vehicle history and compare with all other people within that certain mile radius, and determine a price then. What is the likelihood of a 20 year old male, living downtown, with 2 tickets and 1 accident to be involved in another accident in the near future?

To start off, males insurance rates are always slightly higher than that of females. Also, if you are 20 years old, you have a limited driving experience. If you live downtown, heavy traffic means a higher chance of getting into an accident. And with a history of 2 tickets and 1 prior accident, your insurance rate will surely be higher that most.

There are many ways of saving money on insurance. Most insurance companies have a “bundle” discount. Talk to you agent about getting your auto insurance bundled along with your home, renters, or even life insurance for a better rate. Never have a lapse in insurance. It will hike up your premium. You always want to have at least 6 months of continuous auto insurance and you will get a discount for that. Also having your payments on auto pay can get you a discount. Talk to your personal agent to maximize on these discounts to get saving as much money as possible.

Insurance can be a pain, especially if you don’t understand, but if you get a personal insurance agent, they will be available to help you better understand your coverage and help you maximize your savings.

If you ever have any questions, don’t hesitate to ask. Always stay #covered and be safe.