Why do Car Insurance rates vary from one company to another? Author:    Posted under: Auto InsuranceAuto Insurance questions answeredAuto Insurance Rates


Nowadays, hundreds of car insurance companies are available at our disposal. All of them claim to be better than the other or offer much better benefit than the competition without costing much. There is a battle raging between insurance companies as to who can provide the utmost service for your money.

If the insurance companies provide the same kind of coverage and service, why then do their rates vary immensely?

Insurance providers have different rating systems from one another. This rating system will determine how much premium you have to pay based on how much risk you present to the company.

For the insurance provider to determine how much premium you have to pay, they first have to consider the following factors: the model of you car, your age- younger or first time drivers are categorized as high-risk, which state are you living in, driving record, what kind of driving you do and believe it or not, your credit record.

Not all insurance companies give the same rating on a particular factor. And not all companies use the same factor in determining premium payments. Of course if you have been with the same company for a long time and have had no claims, they might see you as less of a risk and charge you less on your premium than when another insurance company evaluates you.

Some insurance companies prioritize one factor over the other. For example, one company may put greater value on the fact that you have a good driving history but bad credit record, sometimes they will put more weight on the bad credit record angle rather than the good driving history and thus see you as a risk and therefore charge you a higher premium.

Advertising and marketing efforts also affect your insurance premium amount. Bigger companies spend more on advertising than the smaller ones. And you are partly paying for that advertising effort.

So even though insurance companies offer the same thing, it is not a guarantee that they charge the same as well. It is best to always keep your options open and be sure to choose an insurance provider that will give you the benefits that you need. Not because you are paying more means you are getting a better deal. The key is to always do some research first. Talk to insurance agents so you’ll know the best option for you.

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