6 Things Car Insurance Companies Don't Want You To Know

Aug. 29, 2013 - PRLog -- The car insurance (http://www.insureplan.net/) industry is relatively opaque. Everyone knows that they must pay premiums, but many have no idea about how their insurer establishes premium rates. Virtually everybody bad mouths utility companies for hidden charges, but such fees do actually appear on the bill. Hidden car insurance costs stay concealed, however. The agent quotes a certain monetary sum that the company expects you to remit without question or protest.

Following is a list of a few key factors that car insurers would rather you didn't know:

1. Being female definitely helps:

Per our data, the average lady pays 12 percent less than the average man. Over the span of a man's entire driving life, this equates to an extra $15,000 spend on car insurance premiums. There is a very simple reason for this phenomenon: Males drive with more aggression and thus create more claims than women do.

2. Education counts:

You need not read all of Shakespeare. You do not even have to comprehend practical calculus applications. Even being a Harvard graduate does not necessarily help. The most important educational factor is your level of scholastic achievement. Many commentators posit that it constitutes a form of discrimination to charge those who have less education a higher insurance premium, but this widespread practice has survived many legal challenges. For insurance carriers, the higher the degree, the better. A person who has just a high school diploma will pay a little bit more than another individual who holds a bachelor's degree. That policyholder will likewise, pay somewhat more than a customer with a master's degree, and so on.

3. Your credit rating may be the factor that has the most impact on your premium rate:

Whether you love 'em or hate 'em, your credit scores are a key determinant that insurers use to assess your relative financial responsibility. Having a checkered credit past will set off alarms for insurance carriers, as this causes them concern about your ability to meet your financial obligations. Many argue that imposing greater insurance costs on those who have less money to spend on premiums is another form of economic discrimination. Nonetheless, this common industry practice has withstood legal attacks. California is the sole exception to this rule, as it is illegal for insurance companies to use credit scores as a factor when establishing premium rates.

4. Merely breaking even on your car insurance premiums is carriers' main goal:

As with all other financial services enterprises, insurance carriers want to use existing capital to generate new additional capital. This means that they use policyholders' funds to make investments that they hope will earn greater returns. Attracting new clientele is their main business challenge and everybody knows that consumers are mainly concerned with price. Thus, car insurance providers must establish policy premiums within an industry characterized by cutthroat competition while avoiding pecuniary losses due to premium rate that are too low. This is why actuaries simply aim for break-even by weighing your premium amount against available data that indicate your likelihood of causing a claim. Interest earned on deposited funds is their main profit source.

5. Location is everything:

Residents of Louisiana, which has the highest premiums in the nation can save an average of $1,500 on car insurance each year by relocating to North Carolina. Moving from the District of Columbia just across the river to nearby Virginia saves the re-locator an average of $50 each month.

6. Very young and very old have the two highest insurance costs (http://www.insureplan.net/how-to-get-really-cheap-car-ins...):

Drivers in the youngest age groups have the highest car insurance premiums. Rates are usually at the highest point around the age of 18 and steadily drop until the driver reaches the age of 25. From the perspective of insurers, drivers become official "adults" at that point, so their premiums remain comparatively level for the next three decades or so thereafter. Starting around the ages of 55 to 65, premium rates start to gradually inch up and then dramatically rise around the age of 75.

Although car insurance providers do not really conceal the above six factors, they do not readily disclose them. As with all other commodities, the best consumers are forearmed with adequate product knowledge. Now if you're driving the 5.4 star rated Tesla Model S (http://www.insureplan.net/how-the-tesla-model-s-won-a-5-4...), it might be a whole other matter. We'll just have to wait and see!