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Why Do Car Insurance Prices And Rates Vary?

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Car insurance rates vary from one insurer to another, but the same insurer charges different rates for different driver categories.

No two insurers are alike – each has its own business model, profit scheme and overheads. And let us remember that it’s a free market, prices are based on where supply meets demand.

When it comes to varied rates for the same product offered by the same companies, rates are set after an assessment of the risk posed by the driver. The underwriter will evaluate your driving record and customize your premium value. The rate will depend on factors like:

  • Age. Very young drivers are charged the most (16-19 year old drivers, for instance, are billed almost twice more than the average 50 year old)
  • Driving history. Committing traffic violations will raise your premiums, and the more severe the violation is, the deeper you will reach into your pocket.
  • Vehicle type. A ten year old sedan will be cheaper to insure than a shiny new Porsche with a V8 engine and loads of horsepower under the hood.
  • Credit score. Some insurers monitor your FICO rating and will refuse to insure you – or charge more – if you have a score of less than 700.
  • Driving needs and habits. If you commute to work and cross busy highways and interstates you will be billed more than someone who drives on weekends from home to the local supermarket.

Theft protection devices. The more secure a car is, the lower your insurance bill will be. Insurers offer hefty discounts if you show that you care about your car. A GPS tracking device or a measly steering wheel lock will save you some money over the lifetime of a policy.

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