The primary indicator of who you are to a car insurance company is your risk factor. The company uses a number of metrics to determine your premium. Understanding what goes into this process will tell you what insurers are likely to think of you and your risk level. This means you can take strides to reduce your risk in the eyes of car insurance providers.
Some Common Indicators of Your Risk
Insurance companies survive, as any company does, by turning a profit, which means they take in significantly more money than they expend. What it takes to do this in the car insurance world is to perform an objective analysis of how likely a driver is to cost the company money.
Perhaps the most widely known and obvious sign of your risk is your driving history. The first indicator here is your accident history. If you have a past riddled with accidents
that you have caused, you are going to be considered very risky. When you make a claim because of an accident, you become an expense. Furthermore, there is a point when insurers simply will not cover you since it seems certain to them that you will never be able to pay in premiums what you receive in claims.
Another related indicator in your driving history is your ticket history. You could have tickets
for speeding, running a red light, reckless driving, etc. Tickets generally mean that you are a poor driver, but they also mean you are more likely to get in an accident and make a claim. In addition, your credit history is taken into account. This is because in the eyes of car insurance companies, your financial reputation is tied to your driving behavior.
Besides your driving history, your driving patterns also affect your risk. If you drive more often or more miles, and if you drive at particularly busy times of the day, you will be deemed a higher risk. This is because statistically, the more you drive, the more likely you are to get in an accident.
Another determination of your risk is the safety level of your car. The safer it is, the less chance there is that you will make a serious medical claim. Related to this is your geographic location. If you live in a dangerous area where robberies and vandalism are common, then you will have an elevated risk factor as a result.
Furthermore, your age, gender, and marital status affect your perceived risk. A young, single man
is perceived to be riskier than a middle-aged, married woman
. Managing Your Risk
The good news is that these risk factors can be controlled or will eventually be phased out. Some aspects of your risk may take longer than others to rein in, but you are not simply out of luck when it comes to changing how car insurance companies perceive you.
With regards to your driving history, by maintaining a clean record going forward and taking driver’s education courses
, you can reduce your risk. In terms of your credit history, you can make better financial decisions in the future. You can carpool or move closer to work to decrease mileage. As you get older or get married, you will eventually see your risk decline, too.
You are not locked into your current risk level forever. Knowing what the common risk indicators are will give you the ability to manage them going forward.
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