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Car Insurance Groups Keeping Costs Low
Stratification in Practice: Car Insurance Groups and Corresponding Premiums
Car insurance rates are based on sets of car insurance groups decided on arbitrarily by insurance actuaries. This is part of the reason for varying insurance rates from one company to the next. One company may be an expensive option for one person and the least expensive option for another person because of the different car insurance groups used by these companies.
This all happens because each grouping they come up with has statistics run on it. Based on those statistics they determine what the mean average member of that group costs per year for stolen cars, automobile damages, and health damages. The premiums they charge are based on how much they would have to charge members of these car insurance groups in order to pay those costs and still make a profit. Since each company chooses its own groupings, the car insurance premium they quote to you may differ significantly based on which car insurance groups that company has chosen for you.
There are many examples of common car insurance groups with different premiums. One common, general grouping is "female." All other factors being equal, females usually are quoted lower premiums. Teenagers on the other hand are generally quoted very high premiums. Those who drive a sports car will often pay a higher premium, even if they only have liability insurance. Those with a lot of parking tickets may be charged more by some companies. While other companies may only charge more to those with traffic violations. It all depends on what groupings a particular car insurance company has set aside and analyzed as having a significant impact on risk.
It is important for you to understand the reasons insurance companies charge varying rates. Some of the groupings they use you can control, and others you cannot. For example, you cannot control your age, but you can control what type of car you drive. A good insurance agent will give you quotes if you ask for them on each of the different cars you are considering purchasing. Do not forget to include car features as these also can have an impact on what car insurance groups are assigned to you.
For example, getting a two-door convertible with race wheels and a spoiler may cost you significantly more than a four-door family vehicle. But there are even less conspicuous examples that may impact insurance premiums. Buying a domestic car that has been mass manufactured may result in much lower insurance premiums than buying a rare import. Why? Because if you are in an accident there will be a greater supply of repair facilities and replacement parts on the market driving down the costs of getting your car back on the road.
Often the car insurance groups assigned for car models are not based so much on cost of repair as on the habits of the type of people who usually drive those cars. Think about some of the most conservative drivers you know and what kinds of cars they drive. Odds are, those will also fall in the cheapest car insurance groups because the people who drive those have less accidents. Think about some of the craziest drivers you see on the road and what kinds of cars they drive. Odds are, those will be the cars that will cost you the most to get insured.
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