<b>How Automobile Insurance Premiums Are Determined</b>
Have you ever wondered why your neighbor pays less for auto insurance than you do? Or maybe you simply want to know why your premiums have suddenly increased. Although the methods that insurance companies use to determine premiums vary, they typically rely on the following factors.
Your state's department of insurance
In most cases, your insurance company does not set its own rates. Instead, it requests the right to charge certain rates from your state's department of insurance, which in turn approves and authorizes the requested rates.
Your driving record and experience
Your state's department of motor vehicles keeps a record of any accidents in which you were involved, as well as speeding tickets or other traffic violations. The more accidents or traffic violations, the higher the risk you pose as a driver, and thus the higher your premium will be. Conversely, insurance companies will give a discount to those who have a good driving record. As a result, you can save hundreds of dollars on your premium if you and the other drivers listed on your policy maintain a clean driving record.
In addition, if you're a new driver, your premium will be higher than a more experienced driver's premium. Some states consider anyone with less than six years of licensed driving experience to be an inexperienced driver, regardless of age.
Where you live
Where you live directly relates to your chances of having an accident or becoming a victim of auto theft. So, if you live in an area with dense population, heavy traffic, a high number of auto accidents, and a high auto-theft rate, you'll pay a higher premium. And individuals who live in rural, less-traveled areas with lower auto accident and auto-theft rates have lower premiums.
The type of car(s) on your policy
Insurers take into consideration the size and type of car you drive, along with its overall worth and how much it would cost to repair it. As a result, if you drive a vehicle that is either prone to theft or expensive to repair, you'll pay a higher premium.
The number of drivers on your policy
The more people who drive your car, the greater the chances your car will be involved in an accident. If multiple drivers are listed on your policy, you'll pay a higher premium.
The less you drive, the less your chances of having an accident. So, if you keep your mileage below a certain threshold, you may be eligible for a low-mileage discount on your premium.
Other factors that your insurance company uses to determine your premium include the liability limits on your policy, the amount of your deductible, and the cost of doing business (e.g., underwriting expenses, administrative costs). Discounts are also available for safety devices (e.g., automatic restraints) and antitheft devices (e.g., alarms).
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
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