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How rates are determined

When you are ready to purchase insurance, the insurance company or producer (agent) will ask you a series of questions and, based on your answers, will decide whether or not they will accept you as a policyholder. This practice is known as underwriting. By law, insurance companies may not unfairly discriminate by using underwriting standards based on things such as race, religion, nationality or ethnic group, age, sex, family size, occupation, place of residence or marital status. Based on your answers and your circumstance, the appropriate rate to charge you for your premium will be determined.


Certain items will be taken into consideration when figuring your premium, such as the type and age of the vehicle, safety features, where the vehicle is garaged, the average number of miles driven in a year, the coverages and limits chosen for the policy and the driving history of the drivers, to name a few. Some companies do use credit information for underwriting, but are prohibited to use it at renewal time. By law, insurance companies are prohibited from unfairly discriminating between individuals of the same class and of the same hazard in the rates they charge, and may not charge different rates based on an applicant’s race, religion or national origin.



When you’re ready to apply

You need to know what coverages you want, what limits of liability you require and what deductibles you desire. Also, you need to have the following basic information available on all drivers in your household:


  • All drivers’ names, ages, sex and marital status
  • Driving record (accidents and moving violations)
  • Annual mileage driven
  • Full vehicle identification number
  • Year of vehicle
  • Cost of vehicle
  • Special equipment, such as anti-theft devices, airbags, etc.




Things to keep in mind

Inquire about discounts (such as multiple policies with the same company, multiple vehicles, airbags, anti-theft device, etc.) and/or surcharges the company applies. Not all companies will offer the same type of plans or have the same underwriting rules (eligibility/acceptability guidelines). Therefore, it is critical to ask for this information.


Make sure you know the length of the policy term. Policies can be six months (semi-annual) or one year (annual), depending on the insurance company.


Many companies have their own payment (installment) plans that allow you to pay the premium over a period of time, sometimes for a fee. If you decide to buy a policy on an installment plan, find out the applicable service fees.


If you use a premium finance company to pay for your insurance, the monthly payments may be easier; but the total of payments will be larger. Finance agreements are separate contracts that often include a limited power of attorney that gives the finance company some authority over the termination of your policy. Moreover, if the policy is cancelled, the insurance company must remit all return premiums to the finance company, who will apply them to your account.


Ask about higher deductibles. By requesting higher deductibles on comprehensive and collision coverage, you may be able to lower your costs. However, remember that the deductible you choose is what you are responsible for paying out of your pocket in the event you file a claim against your automobile insurance policy.


Should you drop comprehensive and/or collision coverage on an older car? It may not be cost-effective to have comprehensive or collision coverage on cars worth less than $1,000 because any claim you make would not substantially exceed the annual premium cost and deductible amounts.

Personal effects and equipment such as cellular telephones, compact discs, CD players and custom stereo speakers and systems that are not permanently installed in the vehicle by the manufacturer generally are not covered, unless specifically declared and added to the policy.


Read what you sign. Remember, you are ultimately responsible for the accuracy and completeness of the information on your application.


Posted 2:36 PM

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