Texas Auto and Home > Blog > Why is My Neighbor’s Auto Insurance Cheaper than Mine? We Debunk the Myths

Not all things are created equal, should be the slogan for determining insurance rates. There is no one size fits all plan. So how does a carrier determine the cost for each individual? Let’s look at a couple of key factors.

First and foremost, whether or not you like it, all major carriers now use what is called an Insurance Score. No, it is not your Credit Score, so not even your Insurance company knows your score. Insurance Scores are unique to each carrier and are derived from a set of criteria that the carriers provide them to create a score, so it is associated with your credit, just not an actual Credit Score. Manage your finances and get a cheaper rate, just like borrowing money for an Auto or Home.

The second most important factor is the type of vehicle. All vehicles have a safety rating provided by IIHS and independent safety rating organization. A Five star rated vehicle is insurable at a cheaper rate than a Two Star, Safety does matter. Usually the higher the rating, the more sustainable the damages from a crash, i.e. less damages to the overall vehicle and the internal passengers.

Lapse in Insurance is another killer. Not insuring a vehicle is a warning sign to an insurance company that you may be hiding something about the vehicle or possibly you’re not the driver of the vehicle. Having a lapse will automatically place you in a high risk pool. The good news is that you can earn you way out of the high risk pool, usually within 12 months of starting a policy.

Accidents, if you wreck a lot, insurance will cost more. The assumption is that you either take too many risks or do not pay attention. Either way, the next accident is just waiting around the corner. The longer you are accident free, the cheaper your insurance. Good news, we offer a policy with a mulligan or as many call it, Accident Forgiveness. Have an accident and it will not impact your insurance cost.

Too many drivers and too few cars. If your driver to car ratio is above 1, then the risk is also greater of an accident. No one will drive your vehicle like you do, because they do not pay the monthly note or the insurance premiums. Drivers beware.