Why Do Rates Vary Between Auto Insurance Providers?

By Author: Michael Scott
Total Articles: 46
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Rates between different auto insurance providers do vary from one another. In fact, as we have written in our previous articles, the rule of thumb in auto insurance purchase is to canvass as much quotes as you can, instead of settling for the first offer that comes along. Of course, some hit it right the first time. But chances are high that you might feel sorry when you hear other offers that are more attractive right after you have signed your policy. But why do rates vary? And sometimes they vary so much from person to person and from company to company? Let us give you a crash course on why this is so.

Core to the business of the insurance industry is the underwriting process which analyzes your personal circumstances and how much risk you carry. You are then grouped together with others who are seen to be posing a similar weight of risk. The underwriting process essentially makes it possible for insurers to assign a price based on a rating system.

Rating guidelines are normally standard across the auto insurance industry. But each company may have its own underwriting and rating system. And this is ...
... a recognized practice. This explains why different companies charge different rates for the same coverage. This underscores the need to gather quotes from many companies for the same coverage. Comparison shopping may cost you more time now, but it will be for your financial advantage in the long run.

Companies consider the following points to determine your premium rates:

- Age, gender and marital status - 17 years olds and younger, males and singles generally get high premium ratings.

- Coverage limits - as the insurance coverage limits you set go higher, so does you're the cost of your premium.

- Driving history - motorists with a record of at-fault accidents and tickets generally pay a higher premium than those with sterling driving history.

- Policy included members - if you have a teen driver who is part of your policy, your premium would considerably be higher (unless they have their own policy). An insurer can refuse to pay a claim and/or can cancel your policy if you have but didn't include a teen driver on your insurance application or policy.

As you renew or buyyour insurance for the first time, inquire about possible discounts. While not all companies offer the same discounts, you wouldn't know what your insurance company is offering if you don't ask.

And you might also want to factor in that your state has its unique minimum coverage requirements that may not exactly be the same just across town. So now, don't be surprise why rates vary from person to person and from auto insurance company to another provider. There are factors influencing how much you pay for your auto insurance. But don't you feel more confident to search for the best rate now that you know what's behind these rates?
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