What you pay for car insurance (whether you’re happy with the price or not) isn’t just some random number made up by your auto insurance company.
That’s because car insurance companies will input your information and use their own algorithms to figure out the likelihood of you filing a claim. Another way to look at it is, how much you could potentially cost the insurance company.
The riskier you appear, the more they will hike up your premium. The safer you seem, the less you’ll pay.
So how do insurance companies classify you as a driver? This is where car insurance tiers come into play.
What personal information do car insurance companies look at?
There are many factors that affect your car insurance rate.
Here are just a few things that auto insurance companies take into consideration:
- Marital status
- Where you live
- Driving experience
- Driving record
- Past insurance claims
- Previous insurance coverage
- Credit score
- Make and model of the car you drive
What are the car insurance tiers?
Using some of that personal information, car insurance companies will typically categorize drivers into three groups:
- High-Risk or Non-Standard
Keep in mind, every auto insurance company rates drivers differently based on these factors.
For example, auto insurance companies weigh infractions on a driving record differently.
When it comes to how insurance companies look at tickets, violations, or past insurance claims, some are more lenient than others.
What’s the difference between the three car insurance tiers?
Every auto insurance company has different criteria for placing drivers into these car insurance tiers. But let’s dig in:
Preferred drivers are generally customers who insurance companies want to insure. Drivers in the preferred tier usually get the better rates.
Drivers in the preferred tier often have these characteristics:
- Clean driving record
- At least six months prior insurance
- No lapse in coverage
- Very good credit score
- Low to no number of claims filed
Usually the most important factor is having a driving record that has little to no moving violations on it. Having a clean driving record also lets you take advantage of the good driver discount that’s offered by many of the big insurance carriers.
And depending on the insurance company, your age may factor into whether or not you are a preferred driver.
For some car insurance companies, drivers under 25 are automatically barred from being considered in the preferred tier.
This is because statistically, under 25 drivers tend to exhibit risky behavior. Younger drivers are less experienced on the road driving in dangerous conditions or adjusting to them.
Being a standard risk driver means that you’re getting good rates, but you still have room to improve your rate. It’s possible that you only have to improve in one small area to be bumped up a tier.
Here are some of the characteristics of a standard risk driver:
- Average credit score
- Prior insurance coverage
- One or two minor traffic violations
- One at-fault accident
You’ll still get a reasonable insurance rate. For example, you could get a good rate if you have an excellent credit score but maybe have one traffic violation.
Non-standard or high-risk driver
It’s not ideal to be classified as a high-risk driver.
Rates will be significantly higher. Their premiums are high, so drivers let their insurance policy lapse, which puts them in an endless cycle of high rates.
A few characteristics of a high-risk driver:
- Multiple accidents
- Filed several claims
- No prior insurance
- Poor credit score
Is there anything I can do to improve my status?
The short answer: yes. There are always things you can work on to lower your car insurance rates.
You should focus your driving habits because that directly affects your driving record. Whenever you get behind the wheel, remain alert and cautious. Don’t succumb to distracted driving.
Try and maintain continuous insurance coverage at all times. Even a one-day lapse can greatly affect your premium. Sometimes, your premium can be raised by 12 percent. Other times, insurance companies can choose not to insure you.
Keep a close eye on your credit score. Drivers with a low credit score can pay as much as twice more for car insurance than those with a good credit history.
Request a credit report, go through it to look for any errors. From there, small things like paying your bills on time, paying down your debit and stopping applying for credit will help.
Shop, shop, and do more shopping
One of the best things you can do is shop around for car insurance.
Since insurance companies have a different rating system, there’s a good chance you’ll find savings somewhere. Gather as many quotes as you can from various insurance companies. Even if you can find a rate that’s cheaper by a few dollars, it all adds up.