 Auto Insurance Rates are very important in deciding upon a particular Auto Insurance Policy as they are directly linked to the cost of making Auto Insurance. The Insurance Premium is fixed on the basis of Auto Insurance Rates.
These Auto Insurance Rates are determined by individual Auto Insurance Companies within the framework of regulations set by the government. But, the most important thing is that, though the Auto Insurance Companies follow same govt. regulations, insurance rates offered by them vary significantly. This happens because the Auto Insurance Companies combine different elements to figure out the Auto Insurance Rates and also because they have their own different ways of looking at things. So to gather insight about Auto Insurance Rates and their determination, we need to discuss the elements or points that affect the calculation of Auto Insurance Rates.
The Main Elements that Determine Auto Insurance Rates:
Basic Method of Establishing Premiums
There are two basic methods of determining premiums.
In the First Method, the Auto Insurance Companies consider the Repair Cost, the Rate of Injury and the probability that the particular automobile may be stolen and after that they fix the Auto Insurance Rates accordingly.
In the Second Method, Auto Insurance Companies estimate the Current Market Value of the automobile which is to be insured and based on that estimate they decide on the Auto Insurance Rates.
Driving Record
Driving Record of the car owner whose car is to be insured is quite important in determining the Auto Insurance Rates for that particular Auto Insurance Policy. The Driving Record of a person includes the information about
- the number of years he has been licensed to drive
- the Number of Accidents he has committed ( generally in last six years)
- his previous Insurance Experience and insurance record
Place of Living The place of living of the person who intends to go for an Auto Insurance Policy is also important in determination of Auto Insurance Rates. Generally, Auto Insurance Rates are higher in the Metropolitan Areas. This is because, in Metropolitan Areas, Car Accident and Car Theft are more likely to happen due to Higher Density of Traffic and population.
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