The Math of Insurance Rates

Take a look at these cars. All of them are as unique as you are, and all of them have different insurance needs.

Ever wonder why some automobile owners pay higher premiums than others? Does the insurance process seem so random and arbitrary at times?

Actually, the process is very mathematically centered, rates being driven by hard data and statistics. “Insurance rates are all about claims,” says Penny Gusner, consumer analyst. “How many and how big.”

Bottom line, faster cars with bigger engines means higher liability and more claims, according to the data. You may be the safest driver behind the wheel of your shiny new Porsche or BMW, but because these cars are capable of fast speeds and are notoriously expensive to repair and replace, you’ll immediately see the difference in your policy invoice. In this case, a good diminishing deductible and accident forgiveness policy might help to counter-balance the higher premiums.

However, accidents aren’t the only thing that can affect rates. Automobiles like the Jaguar or the Mercedes-Benz require very specialized parts that can’t be found in your local auto parts store. Because of their finicky nature, having them repaired will be much more pricey than something more off-the-shelf like a Honda Accord. SafeCo’s OEM replacement coverage might be a good option in a case like this.

Teenage drivers also account for auto premium spikes. Statistically, they have the highest fatality ratio as well as a history of bad driving habits, DUIs and speeding tickets. Most insurance companies such as Travelers and Progressive now have good student and educated driver discounts available for teen drivers. Even if it doesn’t lower your premium NOW, it might keep your premium under control in the FUTURE.

Also, despite traffic congestion in urban areas, rural areas are notoriously high for auto claims, mostly due to faster speed limits and large animals such as deer roaming the less densely populated areas. Newark, NJ is also statistically the highest in auto accidents in the nation. Sorry guys, that’s just how the numbers fall.

So, what kind of cars are the cheapest to insure? Well, the answer is surprising.

Sports Utility Vehicles such as the Jeep Wrangler and the Ford Escape, both vehicles built for off-road and adventurous lifestyles, would seem like likely candidates for higher premiums. However, they have the lowest rates of losses and repair claims and that average is reflected in lower premiums. Safer drivers? Better safety features? Rock-solid construction? Who knows? Same goes for minivans like the Dodge Caravan and the Honda Odyssey despite the scary images of roll-overs in the news media.

Are some automobiles and situations more difficult to insure than others? You bet! But it’s not impossible, and our qualified staff is always up to the challenge. Whatever you drive, whatever you do, whatever you find important in life, we’ll help you insure it. Try us!

More Choices™

First Baldwin Insurance

Sources:

confused.com
insurancejournal.com