Car Insurance Rating Systems Explained

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Car Insurance
Car Insurance

Car Insurance Rating Systems Explained

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Insurance companies use Car Insurance Rating Systems to determine risk. Drivers with good scores get lower insurance premiums, as it is believed that they are more financially stable, more responsible and have the financial means to better maintain their vehicles.

Most Car Insurance Rating Systems relate insurance to the vehicle, driver and type of options selected.

Some factors that can influence your Car Insurance Rating include:

Vehicle Specific

  • Classification: Two of the most important factors that go into determining the underwriting risk on motorised vehicles are: performance capability and retail cost. The most commonly available providers of auto insurance have underwriting restrictions against vehicles that are either designed to be capable of higher speeds and performance levels or vehicles that retail above a certain dollar amount. Vehicles that are commonly considered luxury automobiles usually carry more expensive physical damage premiums because they are more expensive to replace. Vehicles that can be classified as high performance autos will carry higher premiums generally because there is greater opportunity for risky driving behavior. Motorcycle insurance may carry lower property-damage premiums because the risk of damage to other vehicles is minimal, yet have higher liability or personal-injury premiums, because motorcycle riders face different physical risks while on the road. Risk classification on automobiles also takes into account the statistical analysis of reported theft, accidents and mechanical malfunction on every given year, make and model of auto.
  • Distance Driven: Some car insurance plans do not differentiate in regard to how much the car is used. There are however low-mileage discounts offered by some insurance providers. Other methods of differentiation would include: over-road distance between the ordinary residence of a subject and their ordinary, daily destinations.
  • Where The Vehicle Is Kept: Some towns / cities have a higher risk of accident and theft so where the vehicle is “housed” also is a factor as well as whether the vehicle is parked on the street, off the street and within a garage or car port.

Driver Specific

  • Age: Teenage drivers who have no driving record will have higher car insurance premiums. However, young drivers are often offered discounts if they undertake further driver training on recognised courses. Some insurers offer a good-grade discount to students with a good academic record and resident-student discounts to those who live away from home. Generally insurance premiums tend to become lower at the age of 25. Some insurance companies offer “stand alone” car insurance policies specifically for teenagers with lower premiums. By placing restrictions on teenagers’ driving (forbidding driving after dark or giving rides to other teens, for example), these companies are effectively reducing their risk. Senior drivers are often eligible for retirement discounts, reflecting the lower average kilometres driven by this age group. However, rates may increase for senior drivers after age 65, due to increased risk associated with much older drivers. Typically, the increased risk for drivers over 65 years of age is associated with slower reflexes, reaction times and being more injury-prone.
  • Driving History: Drivers with an excellent driving history with no claims or speeding fines in the last five years are often granted a Rating One and are therefore eligible for the best available premium. If you hold a Rating One for five years or more you will often automatically gain a Safe Driver Discount.

Additional Options For Rating One Drivers

  • Restricted Driver Discount: Some customers have the ability to tailor their cover and gain extra discounts, referred to as a “Restricted Driver Discount” this means that cover is only for people over the age of 30 i.e. you need to confirm that no one under the age of 30 is going to drive your vehicle.
  • Excess: Some customers also have the flexibility of choosing their own excess, basically opting to pay additional excess on top of their basic excess to reduce premiums with the understanding that excess is only paid if you’re at fault. In order to benefit from this you would need to prove that you’re not at fault by collecting all of the details of the at fault party such as name, address, driver’s licence number and relevant contact information in the case of an accident.

If you would like to learn more about Car Insurance Rating Systems, how they may impact your insurance premiums and what options you may have please contact one of our Business Managers on (08) 8374 5444 for an obligation free consultation.

Adrian Brien Automotive Service
Adrian Brien Automotive Service

Source: Vehicle Insurance.