Why Are Some Insurance Companies Cheaper Than Others?

Corporate buildingsAuto insurance companies are both unique and competitive in how they rate motorists, and like many other products, there are usually distinct price differences between businesses. Individual insurers may target motorists in specific markets, meaning that the cheapest policy provider for one driver may not be the cheapest for another. Sorting through the many insurers to take full advantage of pricing differences can take time, but online resources can help expedite the search.

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Typical Rating Factors

Rating motorists can be a complicated process because insurers usually examine a wide range of details before setting a policy price. This can process often includes analyzing the following details about a policyholder:

  • Age
  • Gender
  • Marital status
  • Location
  • Automobile details
  • Annual mileage
  • Driving history
  • Credit history

These details are used to identify a motorist's risk of filing a claim in the near future, and then prices are set based on the individual's risk level. The cheapest auto insurance companies are usually different for each motorist because individual insurers consider different details to be more significant than others, or they specifically target motorists in certain risk categories. Generally, vehicle owners are divided into preferred, standard, and non-standard markets, which represent their level of risk.

Take Advantage of Insurers' Different Business Structures

Although preferred and standard motorists generally encounter the lowest rates, there are multiple insurers that offer car insurance for high risk drivers at an adequate price. To find a low cost insurer, motorists should explore the many different options by comparing quotes from as many sources as possible. Instead of contacting insurers directly, vehicle owners may want to consider completing their research online, where dozens of estimates can be viewed on one website.
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Taking advantage of multiple discounts can also lead to lower rates for many motorists. Just how individual companies usually produce different quotes, insurers also provide unique assortments of special offers and discounts. Contacting several affordable insurers to research what is available may lead to lower premiums than previously expected. It's common for drivers to find reduced rates for maintaining a clean driving record for over three years and for including multiple vehicles on the same plan. Additional savings may be found for belonging to a specific organization or for majoring in a certain field in school.

The potential savings provided by individual companies are numerous, but motorists must make the effort to compare the many different options. Although there is no individual insurer that can offer the lowest price auto insurance policy for all drivers, there can still be a number of affordable options that may be unique to individual vehicle owners.