I will be getting my first auto insurance policy soon, and I don’t know how much it would cost me. Can you tell me how auto insurance companies in Texas compute for premiums?

Dennis

Houston, TX

Since it’s your first time to get auto insurance in Texas, you should know that each auto insurance company has its own set of criteria for evaluating risks and computing for premiums. However, there are basic risk factors that they all take into consideration during the evaluation.

These basic factors are:

Driving history. A person’s driving history is one of the bases for auto insurance companies to identify how the person will drive in the future. Auto insurance companies assume that a person who has committed a violation once will commit the same violation again in the future. The same thing is sometimes expected of those who have been involved in car accidents, they might be more prone to other accidents in the future as well. Debatable yes, I agree.

Age. Studies show that young drivers will most probably be in a car accident because of their lack of sufficient experience in driving. Because of this, most auto insurance companies give higher premium rates to these young drivers. However, when they reach the age of twenty-five, companies expect that have had enough experience and learning with driving, therefore causing their premium rates to drop.

Gender. Statistically, younger male drivers get involved in vehicular accidents more frequently than female drivers. This is why they are charged with higher rates. However, they are charged with lower rates when they turn thirty years old because they become less of an accident risk.

Marital / Social status. Married drivers or those with children are considered to be lower-risk drivers because they are expected to drive more safely than singles do. My wife drives slower and more cautiously with our kids in the car.

Credit history. Some auto insurance companies consider your credit record in determining a driver’s ability to pay on time, and when factoring driving habits. Statistics show that drivers who have poor credit records have a higher frequency of engaging in traffic violations and road accidents, hence they make more insurance claims. Therefore, these drivers are rated as high risk drivers, and they get higher rates than those who maintain good credit records.

You will know the exact details that make up the computation of your premium if you ask your auto insurance agent about it. But try looking around first before you sign any contract. Try checking the internet for online quotes and cheaper rates, or talk to a couple of agents, so that you could find the best deal that would suit your budget and your specific needs.

Ask for discounts, you never know what you might be able to get and how much you can save by asking. Some popular discounts can be given for:

1. Military personnel

2. Good grade students

3. Union membership and bank member affiliations

4. Safe drivers with no claims in last 7 years

5. Defensive driving school attendance

6. Clean credit history – used by many carriers to determine payment risk

AND BY ALL MEANS, consider raising your deductible amount to the highest amount you feel comfortable with. You only pay this amount when you file a claim and that claim is paid by your carrier. If you are a safe driver, you will save a lot of money in the long run with a higher deductible amount. This will also show the carrier that you will not be filing small petty amount claims.