Auto Insurance

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Auto Insurance Basics


Car Insurance Underwriting


When you apply for coverage, insurance companies use their internally produced underwriting standards to determine your insurability. A company may reject your application for coverage if your circumstances do not meet the company’s underwriting standards or risk factors. Drivers with the lowest risk factors are least likely to have a claim, therefore they receive the lowest rates for insurance.


Insurance companies typically review the following when deciding whether to insure you:

• Driving record
•Car make and model
• Prior insurance coverage
• Consumer credit history


Credit Scoring


Many insurance companies look at a consumer’s credit history to decide whether to issue an auto or home insurance policy or how much to charge. This practice is known as credit scoring or insurance scoring.

Insurance scoring has been controversial, and a number of states have placed limits on its use. Insurers and producers (agents) must tell consumers how the company uses credit information before running credit checks. If a company uses credit
information to prescreen applicants, the company must notify you of this before running a credit check.

If an insurer uses credit information to make an “adverse” decision, such as not to offer the best rate or not to offer a policy, the insurer must give you specific reasons for the adverse action.

You have a right to a free copy of your credit report from the credit bureau. If you find an error in your credit report and arrange with the credit bureau to correct it, you can ask the insurer to reconsider.


Credit information is available from three credit bureaus:








Trans Union


Please contact the credit bureau to correct any errors you should find in your information.


Rating Categories

If you are approved for coverage, the insurance company will place you in one of three basic categories of drivers: preferred, standard, or nonstandard.



This category is for drivers considered the best risks, which usually means the safest drivers. Preferred drivers have maintained clean driving records for the past three years and pay the lowest rates.


This category is for drivers considered moderate risks. Rates for standard drivers are higher than those for preferred drivers. People in this category usually drive “family” cars and have reasonably clean driving records.


This category is for drivers considered high risk. They pay the highest rates for insurance. This category may include drivers under 25, drivers with little experience, drivers with histories of tickets or accidents, drivers with poor premium payment records, and drivers with convictions for driving recklessly or under the influence of alcohol or other drugs.


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