In the U.S., each state is responsible for implementing and regulating rules regarding auto insurance. Each state has their own set of rules and each state determines what car insurance risk factors will be considered when calculating premiums. Following are some of the most common factors that are assessed to determine if a person is a high risk driver.
Perhaps the most influential factor used is a person's individual driving record. This record lists any driving violations, suspensions, or accidents that may have been accumulated over the years. Obviously, the more of these there are, the higher a risk the driver is considered. A high risk driver is one who has been charged with careless driving, speeding at an excessive rate, or DUI. Insurance companies review the amount of experience a person has on the road. If they have just been issued their license, then they pose a higher risk than someone who has been driving for thirty years or more.
The gender of a driver goes hand in hand with the above car insurance risk factors. It is widely believed that young men pose a higher risk to insurance companies than females. This is because they tend to drive at higher speeds more recklessly. Thus, they are more likely to be involved in an accident or file a claim against their car insurance policy.
The next important car insurance risk factor is the vehicle itself. Some vehicles are stolen, vandalized, or involved in accidents more often than others. Others cost substantially more to repair as well. On the positive side, vehicles that have anti-theft devices in them will be eligible for a discount.
A vehicle that is used for business purposes will be assessed higher premiums than one that is only used to run occasional errands around town. This is because a business use vehicle is on the road more often and thus faces more exposure to possible accidents. Insurance companies will ask you the average annual distance that you expect to driver your vehicle. Again, this helps them determine the amount of risk you pose based on the amount of time you are present on the streets.
The territory of residence is another rating factor used to determine risk. Larger cities often have higher crime rates, including car theft and vandalism, which means that vehicles there will pay higher premiums. Territory is determined by the zip code entered into the insurance company's computer system.
Finally, a persons credit rating helps insurance companies determine how likely an individual is to file a claim. Insurance companies hold the belief that a person with a low credit rating is less responsible when it comes to financial decisions.