For the past couple of years, we have been bombarded by social media posts regarding insurance. On top of that, insurance advertising is everywhere. Whether it’s on television, radio, in the print media, or online, we can never really escape it. We constantly hear catchphrases such as “lowest rates” and “save money”, and we see insurance portrayed as the same among various companies and something that can be purchased off the shelf. For someone like me who works in the insurance industry, this can be very frustrating at times. How can someone guarantee the “lowest rates” when there is so much that goes into a rate? Just because your next door neighbor insures with a particular company, it does not mean you can both get the same rate. I am an insurance agent and even I don’t know everything that goes into a rate, however here are a few things affecting rates that I do know:
- Location – Highly-populated areas usually have higher rates. This is due to higher crime rates causing more insurance claims. You know: more people, more problems. But…those living in rural areas have a greater chance of hitting a deer. So it’s hard to tell which location is better than others. Rates are unique to each area based on claim statistics compiled by insurance companies.
- Claims/ Tickets – Have you had any claims or tickets? If the answer is yes then your rate is going to be more. Even if you have a not-at-fault-accident, that will still affect your rate. Moving violations will also cause your rates to increase. My advice: drive defensively and follow the rules of the road to avoid unnecessary tickets.
- Insurance Financial Stability Score – Some people refer to this as a credit score, however it is only loosely based on credit. It is actually a measure developed by each individual insurance company and reflects not just credit, but insurance claims history, insurance payment history, and other factors which are not disclosed by insurance companies…not even to their agents. But, the better your score, the deeper your discount.
- Age – The fact is, young drivers have more accidents, and are therefore charged higher rates. And with people now living longer than ever, there is a new trend among insurance companies to charge higher rates to elderly drivers as well, because statistically they also have more accidents.
- Coverage Limits/Deductibles – The higher the liability limit you carry, the more you’ll pay. But higher deductibles result in lower rates, as the financial risk for smaller claims is transferred from the insurance company to you.
- Policy Lapse – Statistics show that those that have lapses in their coverage have more claims. Therefore, most insurers in Michigan require six months of continuous prior insurance coverage; otherwise they will decline to offer a new policy. And those that do offer coverage under these circumstances will include a hefty surcharge for the first six months.
There are other factors which affect rates, but these are the most critical. Additional factors include driver-to-vehicle ratio, annual mileage driven, vehicle safety ratings, vehicle cost, and vehicle performance (hot rods cost more to insure). Most insurance companies offer discounts for various things as well, such belonging to a particular group, being a good student, and having safety equipment such as anti-lock brakes. The best way to navigate through all these variables is to retain the services of a professional independent insurance agent to help you obtain the most appropriate coverage with the company best-suited to your particular situation. Till we meet again…this is Kristen Juracek, signing off.
