If you shop around for car insurance, you’ll likely gather a range of quotes from different companies. One thing that will stand out is how much the prices vary.

You may wonder why there are such variances when all the quotes are for the same insurance product. The reasoning behind it may surprise you and leave you a little more educated on car insurance.

The Basics of a Quote

When an insurance company gives you an auto insurance quote, it will need to gather a lot of information from you. The insurer’s goal in collecting this information is to decide how much of a risk you are to insure.

Risk is significant for insurance products because it tells the insurer the likelihood that you’ll make a claim. If you make a claim, the company loses money. These companies are in the business of making money, so they want to minimize the potential for claims.

If the company determines by looking over your information that you pose a high risk, it will charge you more for your policy. However, the formula a company uses to decide this isn’t public information.

In fact, Business Insider explains that every company uses a different formula as there’s no industry standard. The formula for each company may use different factors and weigh those factors differently, which is why your insurance quotes from various companies don’t end up being the same.

Factors Affecting Insurance Rates That You Can Control

What we do know about auto insurance company formulas is that they involve certain factors most of the time. There are factors you can control and those you can’t. Let’s take a look at the factors you have some ability to manipulate:

• Driving record
• Type of coverage
• Location
• Driving habits
• Vehicle
• Credit history

Driving Record

You can ensure that no matter which company you get an auto insurance quote from, the company will look at your driving record and use it in its formula. The Insurance Information Institute states that accidents and serious violations will raise your rates. New drivers will also have higher rates because they lack a significant driving record that tells the insurance company about their driving abilities. The good news is that you’ll probably get some nice rates if you have a stellar driving record.

Keep in mind that your driving record does change in time. If you received a speeding ticket ten years ago, it wouldn’t show on your record anymore, and it wouldn’t count against you. Time can help you overcome bad marks on your record, and in the meantime, you should drive more carefully.

Type of Coverage

You get to choose the type and amount of coverage you want to buy. The more insurance you buy, the higher your rate. If you go with the minimum required by law, you should get the lowest rates. However, when choosing insurance products, you should always select the coverage you need and not base your choices on price alone.

You can alter your deductible. The deductible is the amount of money you have to pay before the insurance pays on a claim. Higher deductibles will lower your rates.

Location

This factor is partly under your control and partly not under your control. The insurance companies look at accident and theft rates in your area and assign risk to your location. If people in your city or surrounding area make a lot of claims, that will result in higher rates for you.

The option you have is to move somewhere with fewer accidents and less crime. Note that urban areas usually have higher rates than rural areas.

Your insurer will also consider other things that could result in claims. For example, if you live in an area that gets intense storms regularly, it will raise your rates. Again, you could move somewhere else that doesn’t have severe weather issues.

Driving Habits

Driving habits are a little different from your driving record. Your habits include things like how much you drive and how far you drive. If you commute to work, you’ll have higher insurance rates than someone who only uses their vehicle for pleasure.

Some companies also give you an option to install a device in your vehicle to measure your driving habits. These devices measure your distance traveled, the amount of driving when you drive, and your speed and braking habits.

Vehicle

The vehicle or vehicles you insure will impact your rates because the company will consider factors about the car:

• Replacement cost
• Repair cost
• Damage it can do to another vehicle

If you have a car that will be expensive to replace or repair, or you drive a large vehicle that could cause extreme damage to other vehicles in an accident, you can expect to pay more.

Credit

Not all states allow the use of credit to determine insurance rates, but in states that do, you can expect your insurer to run a credit check. Bad credit can equal higher rates because experts say people with bad credit file more claims.

Factors Affecting Insurance Rates That You Can’t Control

There are some things an insurance company will look at that you can’t do anything about, but that still factor into the formula to decide your rates:

• Age
• Gender
• State law
• Healthcare costs

Age

Generally speaking, older drivers pay less because they have fewer accidents. Teens pay the most due to higher accident risks. In addition, the older you are, the more experience you have behind the wheel, which also equates to lower risk in the mind of an insurance company.

Gender

Women usually have lower rates because they have fewer accidents, and get fewer serious violations for things such as drunk driving.

State Law

Almost all states have minimum coverage requirements. You must get at least that amount, which is higher in some states than others. In addition, if you live in a no-fault state, you’ll get a higher quote than someone not in a no-fault state because the law requires your insurer to pay for any accident you have regardless of fault. The insurance company has to factor risk on a broader scale than just the risk you pose.

Also, some states will pass laws that affect insurance companies directly. Regulations and other companies’ requirements increase their operating costs, so they pass that expense to you.

Healthcare Costs

The rising expenses of health insurance are also impacting the costs of auto insurance. If the insurer has to pay more for medical claims, then you will, too.

Getting the Best Quote

Now that you have a better idea of the factors impacting your auto insurance quotes and why they vary so much, you can be a more educated insurance shopper. Use what you know to put yourself in the best situation to get a great auto insurance quote.

For every driver, insurance costs are different. While every company has its own formula to determine the rates of insurance, many of them consider similar things like gender, age, driving record, marital status, state, etc.

If you have been tagged as a high-risk driver, you might have to pay high premiums. However, different ways are available where you can save money on premiums if you are under this category. 

What makes the person a high-risk driver?

Various things are considered by the insurance company or a broker while determining if an individual is at high risk. If you are getting insurance with high premiums, it has something to do with the risk factors. 

Many of them cannot be controlled. If you have broken any traffic rules, it will be there in your record and stay forever which will increase the premium for a few years. However, certain tips can be followed where you might get fewer premiums.

• Go for a defensive driving class

The driver safety classes are conducted almost everywhere but the course length can be different, but usually, they are 7-8 hours long. If you consider taking them, you will get a point on your license which will reduce the premium. 

A trusted high-risk auto insurance broker also offers a discount for the drivers that complete the certified course. 

• Make a comparison

Look for the rates from different insurers. Some of them offer better rates than others. In Particular, progressive is a good option for the drivers at high risk. Progressive rates come under the lowest ones for these drivers. 

At any time if the profile changes because of the marriage, accident, improvement in a credit score or purchasing the house, it is better to reassess the insurance options. As various factors determine the rates, a little change will get you the cheaper option while paying premiums and buying insurance. 

• Do the enrolment in a usage-based program

Many brokers use these apps. These applications can be downloaded on the phone where you can keep a track of your driving. These help in monitoring speed, braking distance, and the total time of driving. Drivers who drive well get the benefit of fewer premium options. 

• Take the education class

This works for the younger generation. As adults are eligible to take this class, it means you might get a discount on insurance. If you are targeted as a high-risk driver, completing the education class will give you a good premium. 

• Buy any other car

If your vehicle is the reason for the high premium, consider changing it to another one. If you want to get a sports car, it will cost you more but switching to a standard model offers a lower premium option even if your record is clear. 

The new cars seem to have more safety features and are reliable. However, collision and comprehensive policy prices depend upon the insurance vehicle insured.

If your label is of a high-risk driver, very little can be done to change your designation. However, the tips that are mentioned can be followed to get the rate of your choice.