What Car Insurance Companies Look For in a Customer

When you operate a motor vehicle on public roads, you are required by law to have auto insurance. This is to ensure that you are financially responsible for any damage that you may cause while driving. If you are involved in an accident and are not insured, you may be held liable for the damages caused, including medical expenses, property damage, and loss of income. Auto insurance is also important for protecting yourself and your passengers in the event of an accident.

While car insurance is a smart financial investment and a requirement in most states, premium rates can be expensive and vary based on specific situations. Car insurance companies will look at a few things when considering an applicant for coverage. Factors such as the type of car being insured, the policyholder’s driving record, and credit score are all considered. In general, auto insurance companies offer the lowest rates to responsible drivers with a lower risk of filing a claim. Let’s take a closer look at some of the things that insurers consider.


Credit Rating

Your credit score is one of the more controversial factors that auto insurance companies consider when setting your rates. Some consumers don’t understand and don’t agree with the use of credit information to inform insurance premiums. However, 42% of car insurance customers believe credit should be factored into car insurance rates.

Many auto insurance companies use credit-based insurance scores to help them decide whom to offer insurance to and how much to charge. Your credit report is a reflection of your credit history and creditworthiness. Auto insurance companies use your credit score to determine how likely you are to make a claim and to assess your risk.

The types of credit scores that credit card companies and other lenders use to evaluate your creditworthiness are not the same as credit-based insurance scores. Insurance companies use credit-based scores that are dependent on your credit report from the major credit bureaus. However, credit-based insurance scores are created to help insurers understand the likelihood that someone will file claims that could cost the company more than it collects. Studies have shown that credit scores correlate with the likelihood of consumers filing insurance claims.


Driving Record

When it comes to car insurance, every company is different. Some may be more forgiving of a customer’s driving record, while others may be stricter. Typically, the worse your driving record is, the more you will pay for car insurance. If you have been convicted of driving under the influence or had multiple accidents in the past three to five years, most car insurance companies will be hesitant to offer you coverage. Some may offer you coverage but at a much higher rate than someone with a clean driving record. If you are caught driving without car insurance, that too can have an impact on your ability to get future coverage from other insurers.

Some companies do take into account how long ago these incidents occurred and may be more willing to work with you if you have had a clean record for several years. However, it is always best to disclose any major accidents or tickets on your application so that the insurer can make an informed decision about your policy and coverage.


Type of Vehicle

When it comes to car insurance, companies are looking for customers who pose the least amount of risk. The type of vehicle you drive is one factor that affects your risk profile and, therefore, can impact your premiums.

Some vehicles are more expensive to insure than others. Sports cars, for example, tend to be more expensive to insure because they are usually more expensive to repair. Vehicles that are popular with thieves, such as luxury cars and pickups, also tend to be more expensive to insure. Certain vehicles like Jeeps and other SUVs are also seen as riskier because of their off-road capabilities.

On the other hand, some vehicles are cheaper to insure than others. For instance, minivans and station wagons are generally cheaper to insure because they are less likely to be involved in accidents or stolen than sports cars or luxury cars.

So how do car insurance companies determine how much a particular vehicle will affect your premiums? One way is by looking at the National Highway Traffic Safety Administration’s (NHTSA) list of the most and least expensive vehicles to insure. This list is based on data from insurers about what types of vehicles incur the most and least claims.

Another factor that car insurance companies consider is how often a particular vehicle is involved in accidents. They may look at data from different organizations that track accident rates among different makes and models of cars. They also use their own claim data to inform decisions.

Overall, car insurance companies look for responsible and reliable customers. This means that customers with a good driving record and credit history will typically enjoy better insurance premiums. Shopping around for insurance and comparing different rates is the best way to secure the perfect policy for your needs and budget.


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