Auto Insurance Risk Selection Car Insurance Cost

Insurance companies use a mathematical process called auto insurance risk selection to determine the cost of your auto insurance policy and your premium. On this page, we’ll look at what Auto Insurance Risk Selection is, why insurance companies use it, and the factors that affect the price of your auto insurance premium.

The dollar amount of the premium on your policy is based on how much financial risk your policy poses to the insurance company.  In order to quantify your amount of financial risk, insurance companies use Auto Insurance Risk Calculation – a comprehensive, statistically-grounded set of equations.

In general, the calculations involved take into account

  • Characteristics of the covered vehicles
  • The type and extent of the policy’s coverage
  • Any dollar maximum limits and deductibles in the policy
  • The profiles of all insured drivers,
  • The intended uses of the insured vehicles

This video gives four easy tips for lowering the premium on insurance policies for new drivers.

Here is a list of trends and facts about Auto Insurance Risk Selection:

  • Men tend to have higher premiums than women.
  • Teenagers and young adults tend to have higher premiums, with this effect tapering off around the age of 25.
  • Senior drivers over the age of 65 tend to have higher premiums.
  • Drivers with recent moving violations (speeding, running red lights, etc.) tend to have higher premiums. However, many policies allow one moving violation every three to five years.
  • Auto collisions and car crashes can increase your premium significantly; sometimes a single crash can increase your premium by as much as 20 – 30%.
  • Married drivers tend to have lower premiums.
  • Insuring cars with higher performance capabilities and higher retail costs tend to increase the costs of your premium.
  • Motorcycle insurance policies tend to have lower property damage premiums and higher bodily injury premiums than car insurance policies.
  • Each vehicle’s make, model, and year have a specific inherent risk value based on data regarding past years’ reported theft, accidents, and mechanical malfunction.
  • Drivers who drive more often, longer distances, in more dangerous situations, or for more risky purposes all tend to have higher premiums.
  • Drivers with better credit ratings tend to have lower premiums.
  • Drivers who opt for a higher deductible can often be offered lower premiums in return.