BIA Blog

Auto Insurance Cost Q & A

Posted by Matt Owens on Wed, Oct 14, 2009
Q. Why do things like my age, sex and driving record affect what I pay for auto insurance?

A. What you pay for insurance is largely based on what kind of risk the company predicts you will be, based on known factors like your driving history, the kind of car you drive, how old you are, what sex you are, your marital status and where you live. 

These judgments aren't just based on instincts or whims. Insurance rates are based on a wealth of statistical data complied by your company over a long period of time (commonly up to 20 years). Most insurance companies divide auto risks into three basic types:

Preferred (low risk)

Standard (average risk)

Non-standard (a nice way of saying high risk)


Q. Why does it matter what kind of car I drive?

A. Increasingly insurance companies are basing insurance rates on their claims experience when it comes to the safety record of the make and model of vehicle you are driving. Factors insurance companies may likely consider: crashworthiness, safety features (i.e. airbags, automatic seatbelts, anti-lock brakes), popularity with thieves, cost to repair, age of the vehicle. Every year new cars are separated into various categories according to price by insurers. The numbers of categories vary from one insurance company to another, but a basic premium is assigned to each price group. For more information on crash testing click here for the Insurance Institute for Highway Safety (IIHS).


Q. Why do my premiums go up if I get a traffic ticket or I'm involved in an accident?

A. Getting several tickets in a short period of time or being involved in an accident can put you in a higher risk classification depending on the severity of the violation and cost of the accident. However, your rates won't automatically go up.


Q. Why do auto insurance premiums vary depending on what I use my car for?

A. Typically, cars are classified based on whether they are used for driving to work, business, pleasure or farming. Cars used primarily for pleasure tend to have the lowest premiums, while cars used for business generally have higher premiums. Insurance companies determine classifications by the number of miles driven per year since the more you drive your car the more likely you are to get into an accident.


Q. What is the average cost of auto insurance?

A. U.S. consumers pay an average premium of $705 for a year's worth of auto insurance coverage. (Source: National Association of Insurance Commissioners) 

Topics: save money, buy, cars, insurance, auto