Are you paying a rate that is fair? Car Insurance Companies and Pricing

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Here's what you need to know...
  • Each insurance company uses a unique formula when setting up your rates.
  • Some factors that determine your rate cannot be controlled by you.
  • Other determining factors can be controlled by you.

Everyone who buys auto coverage wants to make sure that the amount they are paying is fair. Car insurance companies are operating in a free market system and they must be competitive to stay in business.

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Individual car insurance companies set their own rates for coverage.

Each one may consider similar factors when trying to set premiums for their customers, but the companies themselves may not give each factor the same weight when determining how much to charge their customers.

The formulas that car insurance companies use are confidential and likely complicated, but there are some factors that you can assume they consider when you apply for your coverage.

Factors that Affect Fair Car Insurance Rates


One of the main factors that a car insurance company will consider when setting rates is your driving record. Newly-licensed and young drivers pay the highest rates for their coverage.

An inexperienced driver is more likely to be involved in a car accident, and they present a higher risk to insure.

Companies that sell car insurance know that teen drivers, especially young male drivers, have the highest risk of being involved in a car accident. For that reason, they pay the highest rates of any auto insurance customer.

The good news is that once a young driver reaches the age of 25, his or her car insurance rates should drop. While it may not seem fair, car insurance companies look at the demographics of a driver when determining coverage.

The pricing is based on probability, as well as the person’s personal history.

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Ways to Get Fair Car Insurance Prices

If you have accidents and/or moving violations on your driving record, you can expect to pay more for your coverage for between three and five years after the incident. Maintaining a clean driving record is one thing that you can do to qualify for lower car insurance rates.

Here are some areas where you can control the car insurance rates you are quoted:

  • Make and Model – If you choose to drive a sports car or a car that is difficult or expensive to repair, you will pay more for your car insurance premiums. You have the right to drive whatever type of vehicle you wish – but you do need to consider whether the one you want is worth the extra premiums you will need to pay.
  • Location – Where you live also affects your car insurance rates. The insurance company is looking at the likelihood that you will make a claim when it sets rates. If you happen to live in an area that is prone to car thefts or has had problems with vehicles being vandalized, you will pay more for your car insurance coverage.
  • Rural living –This has its advantages for car insurance purposes. Fewer cars on the road mean a lower risk of being in a car accident and having to make a claim against the policy. In contrast, if you live in an urban area with lots of activity on the road, you present a higher risk to insure and your rates will be higher as a result.
  • Safety features – You can lower your rates for car insurance coverage by driving a car that is outfitted with safety devices. Automatic seat belts and airbags reduce the likelihood that you will be seriously injured in a car accident, and can save you money on the cost of your coverage as well.
  • Anti-theft devices – Installing an anti-theft device in your vehicle should also mean that you qualify for better pricing. Be sure to contact the insurer to let the company know that you have done so, and ask that your policy information be updated.
  • Driving school – Some insurance companies offer better rates to customers who have completed a defensive driving course. Drivers of any age or level of experience can take an approved program to ensure that their skills are sharp and that they don’t have any bad driving habits.

Shop Around for Fair Car Insurance Coverage

Young couple shaking hands with sales agent.

How can you find out whether your rate is fair? Car insurance companies do vary in the pricing they offer for the same type and level of coverage. By taking some time to get quotes from multiple companies, you can decide whether you should be changing providers or not.

Enter your zip code to get multiple, free car insurance quotes right away!

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