Many people believe that obtaining fairly priced car insurance merely consists of selecting a ‘big name’ company – people assume they can obtain adequate insurance cheaply at Kanetix, Geico, Prudential or a similar outfit. The truth is, when you purchase car insurance, you may not know that dozens and dozens of different rating factors are considered by insurance underwriters to calculate your individual auto insurance rate. From the type of vehicle you own to the area where you live, each of these rating factors can either increase or decrease your premiums. One of the most important and controversial rating factors that are used to determine insurance rates is age. Read on and learn why insurance companies car about age groups, how your age can affect your insurance premiums, and why this rating policy will remain an essential way to rate premiums.
Insurance Rates Are All About Risk
If you drive a sports car, you are much more likely to pay higher premiums than you would if you drove a minivan. While insurance companies do consider how much it would cost to repair the vehicle, a major reason why premiums are higher for speedy cars is because they are more risky to drive on the road. If you are a young driver with very little experience behind the wheel, you may be considered high risk.
If you have 10 or more years of experience on the road, you are less of a risk because you have more experience. Typically, the older you are, the more experience you have. This is why young, inexperienced operators pay premiums as much as 3 times higher than those of adults who have had their license for 9 or more years.
Insurance companies spend a lot of time and a lot of money gathering and researching age-based statistics to determine rates. After conducting the research, they determine which age groups are the most susceptible to being involved in accidents. If you know which age group is considered high risk, it is easier to understand when your rates will be higher. Here is a breakdown of which age groups will pay the highest premiums and why:
Ages 16 to 24: Drivers with 9 years or less of driving experience are considered very risky drivers. The primary reason for this is because young male drivers have fatality rates that are four times higher than the average. Fatal crashes are also two times higher in the 16 year old age group/
Ages 25 to 39: Rates will decrease at age 25 and continue to go down. While this is not the least risky age range, rates are much lower than those for inexperienced operators.
Age 40 to 50: This is considered the safest age range statistically. Individuals between 40 and 50 receive lower premiums with clean driving records.
Age 75 and above: The accident scale for senior drivers is high, like youthful operators.
Why Is Age-Based Rating Important?
Many people believe that rating drivers based on their age is discriminatory. This is far from the truth and is very important in the insurance industry. Every driver must pay adequate premiums to cover all of the claims filed throughout the year. If risky drivers are paying standard rates, the insurance risks the chance of going bankrupt.
While you cannot change your age, you can do your best to keep your rates low by attending driver’s training courses and taking advantage of discounts. Take your time to understand where you can save money and how statistics can affect your rates. By doing this, you can keep your premiums low and fight statistics that work against you.
This article was composed by Ronald Ellinghouse, a freelancer based in the greater metropolitan area of Orlando; he is an avid student of finance and insurance related issues.
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