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The strength of the modern insurance business is the ability to help consumers find low cost car insurance by tailoring premiums specific to their needs and risk. To do this, insurance companies base their premiums upon a number of proxies (many of which are seemingly politically incorrect), including but not limited to:
Age. Younger drivers, especially those under the age of 25, demographically have the highest insurance premiums.
Sex. Females typically have slightly lower premiums than males.
Driving background. Accident history is a very significant determinant of premium costs. Drivers with a history of faulty driving usually have dramatically higher premiums; an accident taking place within three to five years of the policy (depending on the insurer) will usually raise the cost of the premium by approximately 60%. Having a clear driving record is incredibly useful in securing low cost car insurance premiums!
Type of car. More expensive cars cost more to insure for collision, but tend to factor slightly less when calculating the cost of liability, simply because they are also less accident-prone. It should also be known that the value of one’s premium may decrease over time as well due to the depreciation of the vehicle.
Credit score. Individuals with higher credit scores are less accident prone than those who do not.
Location. Car insurers will often weight the accident and crime rate of the insured’s residency when coming up with a comprehensive policy (be advised that this should be one of many “hidden cost” variables to be considered when moving to a cheaper area, you may not be able to find low cost car insurance!)
Commuting distance. Commuting time is another very important variable in calculating the cost of a premium, since such a large percentage of miles driven are those spent commuting to and from work. Most car insurers will often ask the insured to estimate the number of annual miles driven, which is usually done on an honor system.
Theft devices. Many insurers offer discounts for a proof of purchase of an alarm system or anti-theft device.
These factors may vary from company to company, and some states have regulations on what can and can’t be asked. The state of Massachusetts in 2007, for example, ruled it illegal for car insurers to discriminate on the basis of sex, race, marital status, creed, national origin, religion, occupation, income, education, homeownership, age, and principal place of garaging of the vehicle. Proponents of this policy claim that it helps disadvantaged consumers from predatory practices, while critics claim that can result in irresponsible behavior, and that insurance companies can use different discriminatory proxies, such as net worth, prior coverage amounts, and asset holdings in their calculations instead.