How Are Risk Categories Determined By Insurance Companies

It is well known the fact that companies use a seeming endless number of factors in order to calculate rates and give the final costs.  Furthermore, companies include clients in several categories. Read our blog to find out how are risk categories determined by insurance companies. Also, visit our website if you are looking for cheap auto insurance.

First of all, you should know that there are 3 major categories of drivers, from an insurer’s point of view.  These are Preferred (or Premium, or whatever similar name your insurer may use), Standard and High Risk.

In order to qualify for Premium/Preferred, the list of prerequisites is pretty high and only the “best” drivers and clients can achieve this status. Preferred Drivers are the ones who cost the company little or, preferably, no money.  Clients with 5 or more consecutive years without claims are a priority.  Plus, building a no-claim bonus with a loyalty bonus will grant a great discount. Credit score is another important factor which is used by many insurance companies.  Vehicles considered to be very safe and fitted with extra safety devices and tracking systems will improve the chances of being considered a Preferred Driver.  And if you drive less than the average U.S. citizens, your premiums will be really low.

Standard drivers are those who are likely to cost the company some money, but not that much. Usually, standard drivers have very few accidents: preferably minor accidents and maximum one at-fault accident that did not cause loss of life.  Other factors like mileage, occupation, marital status and age can disqualify drivers.

Being considered a high risk driver implies one or multiple scenarios. You can get labeled as a high risk driver if you are too old or too young, you committed multiple traffic violations in a short amount of time or you have a history of bad credit or car insurance gaps.

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