The Lesser-Known Factors Impacting Insurance Rates
It's not uncommon for insurance agents to hear, "The previous owners of our home said their annual premium is $1000/year; why is ours so much higher?". There are a couple of reasons behind this, but the biggest culprit is YOU! Your consumer reports, your insurance history, your personal preferences, etc., affect your insurance rates. This is why insurance rates vary so much from person to person. It's also why lenders have a hard time accurately estimating your annual premium while estimating closing costs.
Most people know that bundling, claim activity, and their home itself can drive rates, but below are lesser-known items most people are unaware of that determine rates.
1. Your Insurance Score – This is arguably the most crucial item and is made up of a couple of components:
a. Who your current auto insurance policy is with. If your policy is with a "standard" company (generally companies with agents), your score tends to be better. If your policy is with a "non-standard" company (generally companies with no agents- you call the company directly), it can hurt your score.
b. The liability (Bodily Injury) limits on your auto insurance. If these limits are below 100/300, your insurance score could suffer greatly, causing your rates to rise.
c. How long you've been with your current auto insurance company. Insurance companies generally look at how long you have been with your current company (usually up to five years). The longer you've been with your current company, the better your score – this DOES NOT mean you have better rates the longer you stay with one company.
2. Your Age – Older individuals often receive better rates.
3. Your Marital Status – Married couples often receive better rates.
4. Your Occupation – Some companies give discounts for civil service jobs such as teachers, police, firefighters, nurses, etc.
5. Your Preferred Coverages – Homeowners' policies are not always apples to apples, especially if one policy is several years old. If you are buying a home, your policy will be written with today's building material costs in mind.
6. Your Insurance Company and Product – Rates vary based on the company and the product. Some companies may have great rates for a small portion of the population. For individuals they like, their rates are extremely low. For those who don't fit their "appetite", rates are extremely high. On the other hand, some companies target a large portion of the population, and their rates don't vary as much from person to person.
7. Your Claim History - The past 3-5 years of your claim history along with bundling, plays a major role in your rates and even what companies may be available to you.
Insurance is all about risk. Insurance companies spend millions on actuarial studies to help them determine what characteristics and behaviors tend to be riskier or lead to more/higher claims. The riskier you are per these studies, the higher your rates tend to be.