Why Car insurance Rates Vary Between Drivers?

If you are in need of car insurance and you are looking around for a good deal, the best thing to do is to search for an insurance company in your area using our free quotes system. Before you jump in to a quick conclusion, it is advisable to do some research.

Research is essential if you wish to avoid the many low budget car insurance companies that are in the market. They might promise many things, but their coverage may not be good enough. Research will help you find insurance which best suits your need. It is helpful to know the varying rates offered by the different companies. These companies offer different rates for different drivers. But why do different car insurance companies differ in their insurance rates even though they offer similar kinds of insurance?

Reasons Why Car insurance Rates Vary:

The majority of insurance companies determine their car insurance rates by a 'tier system'. In this system, the different drivers are categorized and are placed in tiers. Some insurance companies have as much as 14 tiers. But generally, the insurance companies have a three-tiered system in which the drivers are classified as preferred, standard or substandard drivers.

Preferred drivers are the ones with a high profile. Preferred drivers, more often than not, are insured with the same company for more than 3 years. These drivers have a very low percentage of insurance claims and are not involved in accidents. These drivers also have very low mileage coverage.

The substandard drivers are the ones who are involved in frequent accidents or are involved in collisions. If the drivers are involved in accidents and have claimed more than $500 as coverage, within three years of the insurance, the drivers are categorized as substandard drivers.

Drivers who do not fit into either of the two above mentioned categories are classified as standard drivers.

To sum up, car insurance rates vary because of the different tier system insurance companies have. For instance, you might be classified under the 12th tier in one company whereas another company might put you under the 5th tier, and, accordingly, your insurance rate may differ.

Your credit rating can also affect your car insurance rates. If you have a good credit rating score, your insurance may be cheaper whereas if you have a bad credit record, your insurance rates may be higher.

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Why Car insurance Rates Vary Between Drivers?

Reasons Why Car insurance Rates Vary:

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