How Auto Insurance Risk is calculated

Although it is impossible to determine the exact formula used any auto insurance carrier to calculate risk — take, for example, Praetorian Insurance Company has sufficient information for customers to enable them make informed decision, even if not completely – and determine premiums knowing common valuation factors can help you shop smarter for your car insurance.

Driving history is an important factor

If you have had many accidents in the past, insurance companies logically assume that you are likely to have more accidents in the future.
For this reason, auto insurance companies use your driving record to calculate your risk profile. They can look at:

Each accident in which you were involved.

All traffic being quoted.

Whether your license is suspended or revoked.

Because your driving history plays such a big role in your rates, you can have a policy identical to that of another customer, but your premium can be different. A customer who presents other than a higher perceived risk will pay higher rates.

Demographics is critical to risk calculations

Car insurance companies consider demographic characteristics similar to Praetorian Insurance modus operandi, as they ensure they calculate the risk associated when insuring you.

Consider the following:

Drivers under 25 and people over 65 years of age by statistic will be involved in accidents and pay higher rates.

Men are also, going by statistics to have more accidents than women and pay higher premiums on average.
Your marital status can determine your rates and, with married people on the average, a lower risk of accidents than single adults.
Students tend to be more accountable, and so will most times get a discount for getting above a B average.
The other people on your policy also affect your risk, so also is your rates. Very young drivers, very old drivers, and people with poor driving records could increase your policy.
For more information on demographic factors determines the premiums

Your credit-based insurance score

Some states allow insurance companies to look at your credit-based insurance scores to determine premiums or deciding whether to sell you a car insurance policy

Low credit scores are correlated with risky driving and bad driving records. This means that if your credit-based insurance score is too low, the possibility of facing a high risk of filing a claim is imminent.

Your credit-based insurance score is similar to your credit score, but it does not include many factors. In the states that permit, the majority of auto insurance companies can look to the following to calculate your score:

Payment history

The length of credit history.
Whether you requested for new credit lines in recent times
What type of credit do you have, for example, loans, credit cards, and mortgage?