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What are the primary risk factors of insurance and why are they so important?


In most states, car insurance companies are allowed to set their own rates and do so by using certain risk factors to calculate a driver's auto insurance rate. The rating system, though, must be approved by the state's insurance regulator.

These rating factors are important to an insurer because statistically they help determine those motorists that will be more of a risk for the insurance carrier and thus their rates will be higher. The factors are important for a driver or policyholder to know so that they are aware what criteria is used to set their rates.

Risk factors help insurance companies determine the premium rates as accurately as possible. There are many risk factors. Here are a list of some primary factors that most insurance companies use:

  • Age
  • Gender
  • Marital Status
  • Geography
  • Driving Record
  • Claims History
  • Vehicle Type
  • Occupation
  • Education
  • Miles driven each year
  • Years of driving experience
  • Type of vehicle use (business, personal, commuting, etc.)
  • Current insurance and current insurance limits

If any of your factors change, (you moved, changed jobs, etc.) you need to inform your auto insurer so that your car insurance rates can be recalculated. 

If a change in your life raises  your rates with your current auto insurance provider, then shop around for car insurance to see if there are better rates out there.  Finding an insurer that’s pricing competitively for your particular combination of risk factors can save you hundreds, or more, on your annual insurance premium.


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