Car Classification and Your Insurance Policy

Insurance companies set premiums using classification ratings that are offset by any discounts for which you might be eligible. An insurer derives a classification rating from a number of factors, including the type of vehicle you drive. Here is an explanation of the factors that impact your classification rating.

Location

Your insurance company will divide your state into rating territories based on various statistics. Areas that have more accidents and more traffic congestion pose greater driving risks, and thus will have higher premiums. Similarly, if the theft rate in your area is above average, your premiums will also be higher.

The Insured Drivers

The drivers on your policy also impact your classification rating. The age, sex, and marital status of your insured drivers will influence your premiums. Similarly, the driving record (number of moving violations, accidents, etc.) of the insured drivers will also determine how much you pay for coverage.

What the Car Is Used For

If you use your car on a day-to-day basis to commute to and from work, you are considered a higher risk for an accident than someone who uses a car only for recreational travel. You will also pay higher rates if you use your car for business purposes. Some insurers use the annual mileage driven to determine your classification rating.

Type of Vehicle

The classification of your vehicle can have a profound impact on your premiums. For example, because of its ability to do large amounts of damage, an SUV will tend to have higher premiums than a more moderately sized car. Likewise, a sports car will have higher premiums because it is statistically more like to get into an accident, and sports car drivers are more prone to drive recklessly. Here are the features of your vehicle that will impact your classification rating:

Age - newer cars usually cost more to insure because they cost more to repair
Manufacturer
Model - low-profile cars (economy cars, sedans, etc.) will tend to have the lowest premiums. Cars that are higher risks for theft, such as luxury cars, will also have higher premiums.
Value - an insurer will only reimburse you for the actual cash value of the vehicle. Thus, the less your car is worth, the lower your premiums are likely to be.