David Bell | Feb 04 2021 00:00

Seven Factors Used by Auto Insurance Companies While Calculating Risk

The process of purchasing auto insurance can be challenging for the individual and the insurer. For this reason, you need to explore the offers and pricing of different insurance carriers to see which best fits your budget. The plan you pick should meet all your needs and provide the appropriate level of coverage. When a client consults an insurance agent, the agent performs the risk analysis for insurance companies. That means they decide on a pricing technique that works for both the client and the company. However, how exactly do these auto insurance companies calculate risk? This article will highlight how these companies calculate risk to reach a final pricing decision.

Factors Insurers Use for Risk Calculation

The following are factors that insurance companies consider while calculating risks:

1.Your Driving Record

One factor to consider when determining risk is the client's driving record. This is the first thing the companies look into and analyze in most cases. Insurance companies also review previous accident history. If you have been involved in automobile accidents in the past, you should expect to pay more for car insurance.

2.Distance Between your Home and Workplace

Another strong point of consideration is the client's workplace and its distance from their home. Living a significant distance from your workplace is considered a high-risk tendency. For this reason, insurance companies have separate policies for people who live 10, 20, or more miles away from work. Be truthful with your insurance company about the distance between your workplace and home to avoid losing your insurance coverage.

3.Your Car

The type of car you drive is also a significant factor in the risk analysis for insurance companies. A sports car will demand a higher cost than a minivan for the family. This choice is not due to any form of preference. Statistically, a sports car has a higher likelihood of being driven recklessly than a conventional minivan with one's family.

4.Your Age

The client's age plays a significant role in the risk assessment process. People above the age of 65 and below the age of 25 are more likely to be in an accident. Therefore, younger drivers should expect to get charged more for car insurance than a more experienced individual.

5.Credit Scores

Many auto insurance companies use credit scores to determine the degree of financial risk you present to them. Individuals with a low credit score will get charged more for their first purchase from an insurance firm. The credit score is used to determine the ability to pay for insurance premiums and other incurable costs.

6.Payment History

Most insurance companies check the payment history of their clients. If you had made late payments to your previous company, there's a probability that you will get charged more for the risk of non-payments you pose.

7.Your Marital Status

Many lenders also use marital status in their risk analysis. Many of these firms charge lower for a married driver than single drivers. Married drivers have a lower likelihood of getting involved in an accident because they usually have an increased feeling of responsibility due to their family. These are several factors that auto insurance firms consider to calculate risk appropriately. These factors make it easier for the client and the company to be on good terms after finalization. For the appropriate auto insurance policy,  contact Bell Black Insurance today! We serve all insurance needs for those in Idaho Falls, Island Park, Driggs, Victor, Swan Valley, Ashton, and the neighboring communities in Idaho, as well as Jackson and Star Valley in Wyoming.