An Explanation of Insurance Premium Costs in Woodinville, WA
When shopping for car insurance, it can be difficult to understand why you pay one thing and your best friend or even family member pays something entirely different. The cost of insurance is a complex thing to explain, but we’ll do our best here to eliminate some of the myths.
When shopping for car insurance, it can be frustrating that your rate will vary greatly from a friend who has insurance with the same carrier and is from a similar area and age. However, it is important to understand that each carrier has literally hundreds if not thousands of “tiers” for their prospective customers. A tier is a combination of all variables such as address, age, driving history, credit and more. After tiering, there are then discounts (such as homeownership, prior insurance) and surcharges (such as tickets, accidents or no prior insurance).
Insurance companies have some primary goals:
- Make enough money to cover all losses and make a profit (usually less than 10 cents on the dollar)
- Maintain rates good enough to attract more policyholders and grow.
- Spread their risks (just like an investment portfolio) mixed with good drivers and higher-risk drivers.
Why does your age, gender and marital status impact what you pay each year?
With insurance, it all comes down to loss history for the insurance company. Insurance companies have analysts that review and set rates based off of loss history for certain characteristics of their prospective insured. For instance: if company A has a poor loss history with males, the rate will be higher for males than it is a female if everything else is the same. The same goes for age, marital status, zip code etc. If a company has a lot of comprehensive claims in zip code 98661, then the rates for comprehensive insurance in that zip code typically be higher than an neighboring zip code.
Why does my less expensive 1999 Camry cost more to insure than my 2005 Ford truck?
While this answer has many variables as well, some things that would impact this rate are that your Camry has a higher likelihood to be stolen than your 2005 Ford truck. Because the insurance company can look at losses on your 1999 Camry and see that it paid out a lot in comprehensive theft claims, they would set the rate higher than on your Ford truck. The same goes for safety. If the likelihood of being injured in an accident is higher in your Camry than in your Ford truck, then you will pay more for medical coverage portion of your policy on the Camry.
Why do tickets or accidents impact my rate so much?
Receiving a ticket or an accident dramatically increases your risk of costing the insurance company money in the future, so they adjust your premiums upwards to make up for this. You’re considered a higher risk for the insurance company for having a ticket versus someone who has not received a ticket or an accident.
Why did my insurance increase when I didn’t receive a ticket or an accident?
Insurance companies are always adjusting their rates based off of their losses throughout the year. They can adjust them as many times as they need to throughout the year to ensure that they stay profitable. If you’re on a six month renewal, it is possible that your renewal offer will be higher even if you don’t have any tickets or accidents during your previous period. That said, it is possible then that if you’re on a yearly renewal, that your renewal offer be much higher because you’ve gone an entire year with the same rate.
What can I do to control my insurance premiums?
- The simplest thing you can do to keep your insurance premiums low is to keep your driving record clean and your credit history healthy.
- Shop your insurance with different carriers, or better yet, contact a local independent agent who can quote you several companies at once and also knows which markets you would be better suited for.
- Buying a new car (or new to you)? Call your agent for a quote first. Rates can vary dramatically between vehicles and it is important to call your agent first to quote you your new rate BEFORE you get stuck with it for many years.
- Look at different carrier options. Progressive Insurance for instance is using a device named: “Snapshot.” Snapshot works by tracking your driving behavior when you install it in your vehicle. While not available in every state, a Snapshot customer can save up to 30% off of their insurance premiums.
As always, contact your local agent to find out what solutions are best for you! Every customer is different and every situation is different. Utilize the expertise of a local independent agent and call them for guidance. Safe driving!