April 9, 2021

How does a car insurance company assess driver risk?

Reducing driver risk could save you money on car insurance. (iStock) When it comes to…

Reducing driver risk could save you money on car insurance. (iStock)

When it comes to car insurance rates, your driving record and driving habits can influence what you pay for coverage. Car insurance companies use a risk assessment to determine where to set your rates. Understanding how driver risk is determined can help when searching for an affordable car insurance policy. 

Car insurance rates vary based on a number of factors, including your credit, driving habits and the insurance company. Use a tool like Credible to shop around and lower your car insurance premium today.

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What type of driver am I?

There are three driver risk categories you can be assigned to, based on your driving habits and history. 

Preferred risk driver

A preferred risk driver typically qualifies for the best car insurance rates because they present the least amount of risk to the insurance company. 

You might be a preferred risk driver if you:

  • Have a driving record that’s free of accidents, tickets, or other violations
  • Are age 25 or older
  • Have a good credit history or insurance credit score
  • Don’t have a history of filing claims

Risk assessment can also be based on how much auto coverage you purchase. Opting for full auto coverage versus partial auto coverage could help you achieve preferred risk driver status, saving money on premiums. To make sure you’re not overpaying for car insurance, ​check for free online through Credible’s partners.

Standard risk driver

A standard risk driver means you aren’t the worst driver on the road but you aren’t the best either. You most likely have an average driving record and past experience with having a car insurance policy.

You might be a standard risk driver if you:

  • Have been involved in an at-fault accident
  • Have an average insurance credit score
  • Have gotten a ticket or two for minor traffic violations
  • Have ever had to cancel car insurance because of missed payments

Being a standard risk driver means you might be shut out of getting the lowest auto insurance rates. But you may still be able to qualify for discounts that could lower your car insurance monthly payment. 

Wondering how much you could save? Head over to Credible, ​which has partners to give you a free quote.​ It only takes two minutes.

High-risk driver

A high-risk driver typically pays the most money for car insurance as they present the greatest risk to the insurance company. Getting an auto insurance policy with high driver risk isn’t impossible but finding affordable coverage may be more challenging. 

You might be a high-risk driver if you:

  • Have had one or more major accidents
  • Are under age 25 or have never had car insurance before
  • Have a low car insurance credit score
  • Have numerous tickets or violations on your driving record

You could also be assigned to the high-risk driver category if you opt only for the minimum coverage required in your state versus more comprehensive car insurance.

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Other factors that influence a driver’s risk profile

Aside from your driving habits and history, your car insurance provider may look at other things to determine your driver risk class. That may include things such as:

  • Vehicle type: The more expensive a vehicle is or the more upgrades it has, the more it may cost to insure. 
  • Vehicle purpose: What you use your vehicle for also matters when getting car insurance quotes. 
  • Driving area: Where you live and where you drive most often can affect your drive risk profile and what you pay for insurance. 
  • Yearly mileage: The more miles you drive, the greater the odds of having an accident and the higher the driver risk.  
  • Personal factors: Things that are totally unrelated to your driving history, including your age, marital status, and gender, can also play a part in determining what you’ll pay for car insurance. 

Comparing multiple insurance quotes can potentially save you hundreds of dollars per year. And, it’s so easy ​to get a free quote in minutes​ through Credible’s partners here.

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How can I lower my rates? 

If you want to reduce car insurance rates, here are some of the best ways to save:

  • Improving your credit score
  • Changing to a more insurer-friendly vehicle
  • Getting the defensive driving certification
  • Asking your car insurance provider about bundling and other discounts that might be available
  • Maintaining a good driving record

Shopping around to get car insurance quotes can also be helpful for comparing coverage options and rates from different providers side by side. Car insurance companies aren’t identical in how they approach risk assessment so it’s worth taking time to see how they measure up. 

Already have good car insurance but want to make sure you are alerted when you can get a better deal? Credible’s partners ​can send you free quotes if they find you a better rate.

THIS IS THE BEST WAY TO LOWER YOUR CAR INSURANCE COSTS

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.