What Affects the Price of Auto Insurance?

Classification

When determining the rate for an auto insurance policy, insurers separate drivers into categories called classifications. Drivers are classified based on a number of different characteristics, including but not limited to age, sex, driving record, type of vehicle, gaps or lapses in insurance coverage, amount of coverage purchased, and annual miles driven. History has shown that drivers with certain characteristics, such as a poor driving record, have a greater chance of being involved in an accident, and the drivers in those classifications must pay higher rates. While some of the classification criteria (such as age and sex) are out of your control, others, such as driving record and type of vehicle driven, are within your control.

Insurers have the right to decide what types of drivers they wish to insure, as long as they apply their criteria consistently and fairly. The eligibility criteria an insurer uses to select the drivers it is willing to insure are referred to as underwriting criteria. Some insurers specialize in adult drivers with clean driving records, and will turn down an application from a teen-aged driver, or an adult who has had several serious violations. Other insurance companies specialize in high-risk drivers and may accept individuals who have had several accidents or violations. The rates offered by the different insurance companies will vary, based at least partially on their choice of drivers to insure. If you are turned down by one insurance company, you should apply with another, since the two insurers may have different underwriting criteria. If you had a poor driving record in the past but it has improved over the last few years, it may be worth shopping around for another insurance company that has lower rates.

If you have trouble finding any insurer willing to sell you a policy, you should contact the assigned risk plan at the number given previously.

Discounts

Discounts are awarded because the insurance company sees certain types of drivers as “better risks.” Before purchasing auto insurance, be aware of discounts you may qualify for that are offered by your company. Here are some discounts to look for:

• Multiple Vehicles—Most insurance companies offer a discount to customers who insure more than one vehicle with their company. Industry statistics show that individuals and families insuring more than one vehicle have better than average claims experience.
• Driver Education Courses—Discounts for driver education courses are targeted primarily at younger and older drivers. Individuals may be able to lower their auto insurance rates by voluntarily participating in a state-approved course.

Alaska law requires companies to give a discount to any primary driver who is over age 55 and who voluntarily completes a motor vehicle accident prevention course approved by the Division of Motor Vehicles. The discount must be applied for the three years following the successful completion of the course.

For further information on driver education programs, contact the Division of Motor Vehicles Driver Improvement Bureau at (907) 273-2223.

• Good Student—Many insurance companies have found that students who earn a B average or better tend to have fewer accidents. For this reason, many companies offer a good student discount.
• Anti-Theft Devices—Devices or systems that deter theft or vandalism may also lower claim costs. Many companies offer discounts for anti-theft devices such as security alarms, combination door locks, etc.
• Auto/Home Package—Insurance companies may offer a discount if they insure both your vehicle and home.