Car Insurance Tier System

A car insurance tier system is used to help calculate car insurance rates. An insurance score of 770 is considered good. Car insurance policy tiers and auto insurance coverage tiers refer to the level of coverage you choose. These are some of the factors that affect car insurance rates.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses...

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Reviewed byJoel Ohman
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UPDATED: Jul 30, 2020

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Here's what you should know...

  • Car insurance companies rate drivers based on a lot of factors to calculate rates
  • Your car insurance tier, or car insurance score, is part of what determines rates
  • There are three types of car insurance, each with its own rate that adds up to the total

When you shop for insurance, you’re looking for the best car insurance companies, right? Similarly, insurance companies want to seek the best clients as well. Car insurers operate by gauging risks in potential or active clients with a car insurance tier system.

We understand that the insurance industry can be complex and overwhelming. This is why we will cover tier systems step by step to help you determine which provider is right for you. Before learning more about the car insurance tier system, please feel free to type in your ZIP code above to find reasonable rates to suit your needs in your area.

Car Insurance Rating Tiers

You may be asking, “What is an insurance tier score?” This is a credit rating utilized by insurers to assess any potential customer’s level of risk. With this information, they then determine how much the potential policyholder’s monthly insurance premium will be. The score has a range of 200 to 997. A low score is indicative of a higher level of perceived risk.

Now you’re probably wondering, “What is a good score for auto insurance?” If you have a score of 770 or higher, you are in a good range. If you have a lower score, you are seen as a larger risk and are probably going to be paying higher monthly premiums.

What factors determine your insurance premium? There are numerous factors within auto insurance coverage tiers that are considered when determining risk.

There are primary and, occasionally, secondary factors that insurers consider.

Let’s cover the main factors, starting with age. Due to their lack of experience, young and unproven drivers will unavoidably have to pay higher premiums. After about nine years of safe driving, they will see their rates decrease.

This touches on another primary aspect that insurers consider when determining risk, which is a policyholder’s driving history. Other factors include the customer’s credit score, years of experience behind the wheel, insurance history, coverage level, and claims frequency.

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So, what is a car insurance tier by definition? It is simply a level at which an insurer can examine you and your history. If you’re wondering, “Why is my car insurance so high?”, it is likely because your insurer saw you as a risk, based on several factors. Perhaps you are young and inexperienced driver. Maybe you have multiple filed claims on your record. Everything is taken into consideration.

“Okay, fine, but what makes car insurance go down?” The simplest answer is safe driving over an elongated period. You may also bundle policies, take driver education courses, and take advantage of low mileage discounts. Drive Safely can help you find drivers ed classes in your state.

Just about every insurer offers various discounts, so inquire with your agent about how you can knock down your rates.

“How does car insurance go up?” Poor driving is the central cause of increasing rates. If you drive safely and take advantage of every discount you can, you will most likely avoid this issue.

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The Three Types of Car Insurance

There are also car insurance policy tiers, or car insurance coverage tiers. This is to do with how much coverage yu carry. What are the three types of car insurance? Liability auto insurance coverage, collision insurance, and comprehensive car insurance are the three most common types of coverage. Liability insurance protects you in a situation where you cause damage to another’s body or property. This video further explains liability coverage.

Liability coverage doesn’t just cover the policyholder; it also covers any family members that are listed on the policy. Furthermore, this coverage helps you even when you are driving another person’s car, as long as you have permission to do so. A policyholder has the option to buy more than the state-required minimum to protect them in case they get sued.

This next table shows the minimum requirements for liability coverage in each state. In the third column, you’ll see three numbers separated by slash marks. The first number is a limit for one individual, the second is for all persons injured in an accident, and the third is coverage for property damage. Additionally, BI means bodily injury, PD means property damage, UM means uninsured motorist, UIM means underinsured motorist, and MedPay means medical payments coverage.

Car Insurance Coverage Requirements by State
StatesCar Insurance
Requirements
Minimum Liability
Limits
AlabamaBI & PD liability25/50/25
AlaskaBI & PD liability50/100/25
ArizonaBI & PD liability25/50/15 (2)
ArkansasBI & PD liability, PIP25/50/25
CaliforniaBI & PD liability15/30/5 (3)
ColoradoBI &PD liability25/50/15
ConnecticutBI & PD liability, UM, UIM25/50/25
DelawareBI PD liability, PIP25/50/10
D.C.BI & PD liability, UM25/50/10
FloridaPD liability, PIP10/20/10 (4)
GeorgiaBI & PD liability25/50/25
HawaiiBI & PD liability, PIP20/40/10
IdahoBI & PD liability25/50/15
IllinoisBI & PD liability, UM, UIM25/50/20
IndianaBI & PD liability25/50/25
IowaBI & PD liability20/40/15
KansasBI & PD liability, PIP25/50/25
KentuckyBI & PD liability, PIP, UM, UIM25/50/25 (4)
LouisianaBI & PD liability15/30/25
MaineBI & PD liability, UM, UIM, Medpay50/100/25 (5)
MarylandBI & PD Liability, PIP, UM, UIM30/60/15
MassachusettsBI & PD liability, PIP20/40/5
MichiganBI & PD liability, PIP20/40/10
MinnesotaBI & PD liability, PIP, UM, UIM30/60/10
MississippiBI & PD liability25/50/25
MissouriBI & PD liability, UM25/50/25
MontanaBI & PD liability25/50/20
NebraskaBI & PD liability, UM, UIM25/50/25
NevadaBI & PD liability25/50/20
New HampshireFR only25/50/25
New JerseyBI & PD liability, PIP, UM, UIM15/30/5 (6)
New MexicoBI & PD liability25/50/10
New YorkBI & PD liability, PIP, UM, UIM25/50/10 (7)
North CarolinaBI & PD liability, UM, UIM30/60/25
North DakotaBI & PD liability, PIP, UM, UIM25/50/25
OhioBI & PD liability25/50/25
OklahomaBI & PD liability25/50/25
OregonBI & PD liability, PIP, UM, UIM25/50/20
PennsylvaniaBI & PD liability, PIP15/30/5
Rhode IslandBI & PD liability25/50/25
South CarolinaBI & PD liability, UM25/50/25
South DakotaBI & PD liability, UM, UIM25/50/25
TennesseeBI & PD liability25/50/15 (4)
TexasBI & PD liability, PIP30/60/25
UtahBI & PD liability, PIP25/65/15 (4)
VermontBI & PD liability, UM, UIM25/50/10
VirginiaBI & PD liability (8), UM, UIM25/50/20
WashingtonBI & PD liability25/50/10
West VirginiaBI & PD liability, UM, UIM25/50/25
WisconsinBI & PD liability, UM, Medpay25/50/10
WyomingBI & PD liability25/50/20

Property Damage Liability is like Bodily Injury Liability, except it covers damage done to someone else’s car rather than their body. It also includes damage to telephone poles, fences, buildings, and other inanimate objects.

Collision Coverage is the next form of mandatory insurance. This pays for damage to the policyholder’s car that was sustained in a collision. Even if a policyholder is at fault in an accident, this coverage will reimburse them for car repair costs. If the policyholder isn’t at fault, their insurer may try to recover the money spent from the at-fault driver’s insurer.

Here is a video that further details Collision Coverage.

The final mandatory coverage is Comprehensive Insurance. This reimburses for a policyholder’s loss in the event that anything other than a collision befalls their car. Damage from fire, windstorms, hail, floods, vandalism, riots, deer, and even missiles may be covered by comprehensive insurance. Like liability, this coverage also allows policyholders to purchase more than the minimum amount.

Here is a video that further details comprehensive coverage.

There are optional coverages as well. Uninsured and Underinsured Motorist Coverage both reimburse the policyholder if they are hit by someone who does not have enough coverage or no coverage at all, which is more prevalent than you might think.

Medical Payments (MedPay) and Personal Injury Protection car insurance (PIP) pay for the treatment of injuries to the policyholder and their passengers. PIP also covers lost wages and, occasionally, funeral costs.

The following video further explains MedPay and PIP.

 

Now that you know about the car insurance tier system, type in your ZIP code in our tool below to find reasonable rates in your area.

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Frequently Asked Questions: Car Insurance Tier System

We hope we answered all questions about the car insurance tier system and what factors determine your insurance premiums, but if not, please refer to these common questions below.

1. What are secondary underwriting tiers?

These are factors that cannot be weighted as heavily as the primary factors.

2. How many secondary underwriting tiers are there?

All in all, there are 16 optional secondary rating factors.

3. What are the 16 secondary rating factors?

Type of vehicle, vehicle performance capabilities, vehicle use, percentage use of the vehicle by the driver being rates, multi-vehicle household, academic standing of the rated driver, rated driver’s completion of driving training or defensive driving courses, vehicle characteristics, rated driver’s gender, marital status, policy persistency, smoker status, multiple policies, gender, claims frequency, claim severity.

4. What makes car insurance expensive?

Usually, it is a poor driving record with multiple filed claims.

5. How is car insurance calculated?

All of the aforementioned factors within the primary and secondary tiers such as the car itself. The cost of your car is a big part of determining the cost to insure it.

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