Younger drivers tend to pay more for car insurance. The highest rates are assigned to drivers between 16 and 25 years old. Experienced drivers receive lower rates until around age 55, when rates rise slightly again. In most states, insurers use a person's credit score to calculate auto and home insurance premiums.
This is done because there is a correlation between a person's credit rating and their chances of filing claims. Therefore, keeping finances under control can help policyholders save on insurance costs. Comparing the rates of several insurers is often the best way to save on auto insurance premiums. Your car insurance premium is the amount you pay to your insurance company on a regular basis, often every month or every six months, in exchange for insurance coverage.
Each insurance company determines their rates differently, but your premium is generally based on details about you, the type of car you own, and the coverages you select. Insurance premiums may also include service charges, depending on state insurance laws and the insurance contract. For example, a 16-year-old boy driving a new sports car will pay a much higher insurance premium than a 40-year-old woman in a van. While an insurance premium is the amount the policyholder pays in exchange for coverage, a deductible is the amount that the insured must pay for damages before the coverage takes effect.
The goal of every insurer is to balance the amount it charges you with the likelihood that you will need an insurance payment. To this day, most auto insurers base premiums in part on “territorial ratings”, derived from the risk of the area where the car is located. When buying an insurance policy, one of the most common terms a person will encounter is insurance premium. Once you've paid the premium, your insurer will pay for the coverages detailed in the insurance policy, such as liability and collision coverage.
The easiest way to lower your premium is to compare different insurers to find the cheapest car insurance for you. These are some of the most common factors that auto insurers consider when determining insurance rates, according to the Insurance Information Institute (Triple-I). Once you've signed up for insurance, your insurer could calculate your credit-based insurance rating (CBI) when determining your premium.