Insuring Your Car :automobile insurance ratings

What is a automobile insurance rating?

Automobile insurance ratings are different from insurance credit scores. An automobile insurance rating is based on your ability to repay amounts you have borrowed. An insurance credit score predicts the likelihood of you becoming involved in a future accident or insurance claim and is based on information of policyholders with similar credit characteristics who have had previous claims with us.

When banks and other lenders determine automobile insurance ratings, they may factor in your income, job history and other matters that might affect your ability to repay a loan. Banks also can deny you a loan based on your automobile insurance rating, but we won't deny you a policy based on your insurance credit score.

Do all insurance companies use automobile insurance ratings?

Most do. According to a recent survey by Conning & Co., a Hartford, Connecticut based research firm, 92 percent of insurance companies use credit information when underwriting new policies. An automobile insurance rating is just one of several underwriting tools Progressive Direct considers when determining rates. We also consider rating variables such as driving record, type of vehicle, where you live, your gender, your age and other factors.

What factors besides credit are used to determine automobile insurance ratings?

In addition to credit, we consider a number of other insurance rating variables during the underwriting process. The most common variables considered are:

Driving record
Vehicle type
Age
Gender
Garaging location
Insurance companies evaluate consumer information differently to determine rates - that's how they compete with each other. In addition, each state has its own set of insurance regulations. In certain states, some of the factors listed above cannot be used to determine insurance rates.

How does Progressive Direct use insurance credit scores?

Like other insurers, Progressive Direct uses insurance credit scores and other underwriting tools and automobile insurance rating variables to place customers in groups, determine potential risk for those groups, and calculate accurate rates based on the potential risk. Progressive Direct does not use information about credit history solely to refuse to insure a customer or to cancel a policy. In fact, our use of credit scores has allowed us to offer lower rates to more customers.

In the standard auto policy, “collision” is defined as “the upset of your covered auto or a non-owned auto or their impact with another vehicle or object.” Note that collision with an object is covered, even if it is not another vehicle.

The standard policy clearly spells out the losses that are not related to collision, such as missiles, falling objects, fire, theft, explosion, earthquake, windstorm, hail, water, flood, malicious mischief, vandalism, riot, civil commotion, contact with a bird or animal, and breakage of glass.

Auto policies are nearly always written with higher deductibles for collision than for non-collision losses. By treating contact with an animal as a non-collision loss, you have the advantage of applying a lower deductible. This difference in deductibles is an implicit recognition of the fact that drivers usually have greater opportunities to avoid contact with other cars or objects than with free-moving creatures that react unpredictably to lights, motion, and sound.

If you cause an accident that results in damage to a car you are driving but do not own, the ISO standard policy will provide the broadest coverage applicable to any covered auto.

Drivers often drive their cars into a state other than the one where they reside. Since car insurance laws vary from state to state, settling a claim can become complicated if an accident occurs when you are out of your home state.

The out-of-state coverage provisions in a standard auto policy refer not only to the required minimum amounts of coverage, but to required types of coverage as well. This means that if you drive into a state where no-fault benefits or other types of coverage are required, the policy will automatically provide the minimum amounts and types of coverage.

If you travel outside your home state, the policy will adjust to these laws by automatically increasing the liability limits to conform to that state’s laws, and will provide coverage as required by the state to conform to its laws with respect to a nonresident driving within the state.

One of the most frequently asked questions about car insurance is, "Do I need to buy car insurance when I rent a car?"

When you rent a car, you will usually be offered a "collision damage waiver" or CDW (some rental companies use the term "loss damage waiver" or LDW, but the coverage is the same).

This waiver releases you from responsibility for damage to the rental car, provided you comply with the rental contract terms. If you decline the coverage and have an accident, you may be held responsible for the entire value of the car.

One common problem is that many of these policies contain limitations and loopholes that renters can unknowingly violate, voiding the coverage. For example, CDW can be voided if you drive on an unpaved road or if you engage in negligent driving (and the car rental company ultimately determines what is meant by “negligent”). CDW is usually over-priced, adding around $11 a day to the rental cost.