Why can’t I just tell them what vehicle I drive and have them give me a quote?
I get this question a lot. It can be really frustrating when you are just trying to get an idea of the premuim for a quote and the insurance company or agent sends you a three page application for your personal insurance.
While this is frustrating, there is a reason for it, and you can make it work to your advantage. For people with business policies check out this article.
Insurance companies operate off of data. They collect and share tons of information and put that through a rigorous analysis to try and figure out what is the optimal premium they can charge that will still win them clients while being able to cover costs and make a profit.
As they do this analysis, they find that there are people with certain characteristics that are less likely to have a claim than others. Driving History, Credit Score, whether they own a home, level of education, type of employment, age, gender, zip code, type of vehicle they drive. For home insurance there is even more information that they need about the home.
All of these things are taken into consideration and depending on the data, how each one of these categories performs from a claims perspective, they make assumptions as to how likely the people within each category are to have a claim.
So, what can you do? What you want to do is be at the top of as many categories as you can.
For example, driving history is one of the most heavily weighted factors when determining your auto insurance rates. Speeding, driving under the influence, distracted driving, all of these things will not only get you an expensive ticket, but will impact your insurance rates for 3 to 5 years.
Below is a list of categories that can affect your insurance premium.
Credit Score (the higher the better)
Type of Vehicle (i.e sports cars are more expensive to insure than minivans/ newer vehicles are safer but are also more expensive to fix or replace)
Where you live
How many miles you drive
Level of education
Type of Employment
Number of claims
Year the house was built
Year the house was updated (particular attention being paid to Electrical, Plumbing, Heating, and Roof)
Materials the house is made of (builders grade vs custom/ combustible materials, ie Frame, vs non-combustible Masonry)
Size of the house
Gas or electric
Distance to a fire hydrant
Distance to the Fire Department
Type of Fire Department (professional vs Volunteer)
Brush Score (likelihood of being affected by wildfires)
Type of neighborhood (high crime or not)
Smoke Detectors (hardwired or battery)
Primary Dwelling or Secondary
Is the area prone to weather related events (hail, high wind, tornado, Hurricane, etc.)
Number of Claims
All of these things are being taken into consideration when you are getting a quote. You can see then, how difficult it would be to ball park a quote. Many of these things will be different from one customer to the next. Two identical houses can be next to each other but one pays more in insurance than the other because one has a security system and the other doesn’t.
If you can work the system though to make it so you rank at the top of these categories, then insurance companies will compete to have your business and you will pay less than the average. If you are doing these things, don’t be afraid to brag about them to your insurance agent. Let them know all of these things and make sure that they put that information on your quote. It could save you hundreds or thousands of dollars a year.