We all are aware of how important and necessary auto insurance policies are. Your car is an integral part of your life, and our work depends on our vehicles, more than we might imagine. You’d be surprised to know that over 6 million car accidents are happening every year in the US. So the chances of you getting in a car accident are very high. Do you know what else is also very high? The cost of medical treatments and repairing the car.

This is why the auto insurance industry is booming and will continue to do so. This is also the reason why it is mandatory to have liability coverage in 48 states (except Virginia and New Hampshire) and a personal injury protection plan in 12 states called the “no-fault” states. Apart from that, you need to get important optional vehicle insurance coverages such as collision coverage, comprehensive coverage, uninsured motorist coverage, etc.

But while buying any auto insurance policy, or even looking for quotes, auto insurance companies require you to give some personal details about yourself. Companies require a lot of information about you, some obvious such as driving record, some not so obvious such as credit score, gender, etc.

In this article, we’ll look at why your auto insurance provider needs to know about your driving history, and how it affects the rates of your car insurance policy. Let’s get started

Auto Insurance and Risk Factor

Before we get into the core topic of this article, there’s something we need to understand before. How do auto insurance companies, and for that matter, every other insurance company, operate? How are insurance companies able to pay out hundreds of thousands, even millions of dollars in insurance claims? It all comes down to risk management.

Insurance companies are risk-management companies. Their main job is to manage risk properly and make money from it. When you buy an auto insurance policy, you are paying the insurance company to take your share of the risk. If you crash your car into another car or a pole, the auto insurance company will pay for the cost of medical treatments and repairs. How likely you are to be in an accident is what matters to the insurance company.

Auto insurance companies need to make sure that the number of people making an insurance claim is always at a minimum, while the people who are paying insurance premiums and getting new policies are always at a maximum. This ensures that more money keeps coming in, while only a little goes out in insurance claims.

If the number of people getting in a car accident (and making an insurance claim) gets higher, the insurance company will fail. This is why they have to be very careful in managing risks. Now let’s look at how they do it with your driving history.

Your Driving History and Insurance Rates

When you are looking for policies, and trying to get an auto insurance quote, the car insurance company considers a list of different factors to calculate the rates. All these factors contribute to the possibility of you getting in an accident, either directly or indirectly. Of course, different factors are given different weightage.

One of the most important factors in determining the auto insurance rates is your driving history. It is because how you drive, and how you have driven before, contribute the most to the probability of an accident. A rash driver who often goes over the speed limit is way more likely to be in a car accident than a person who drives 5 miles an hour under the limit.

So people with a bad driving record and poor driving history with traffic violations such as speeding, rash driving, DUI charge, etc will be charged a lot more than people with a good driving history and a clean driving record. It applies to all auto insurance companies. While the rates may vary, you’ll have to pay more nevertheless.

Since auto insurance companies need to get policyholders who’d pay insurance premiums, they will sell you the policy, but to offset the risk of an accident, they’ll charge you more. How much more? That depends.

For example, people with minor speeding tickets have to pay 20-25% more than the average rate. But serious violations attract much higher price hikes. A DUI charge is one of the worst things about your auto insurance rates. You might have to pay an astounding 400% more than the average rate if you have a DUI charge.

You can get your driving record history via a CLUE report that is available for free. The best way to make sure you pay less for great auto insurance coverage is by driving carefully, not giving in to temptations and going over the speed limit, and never driving under the influence. Not only that will get you to pay way more for the same insurance policies, but it can also land you in jail.

Policies that Get a Price Hike

With a bad driving record, the car insurance policies that will see a price hike includes:

Liability coverage: The most important car insurance policy that you need to have if you want to drive legally on the roads. This policy can be claimed by the other driver to pay for the medical treatments and repairs in an accident caused by you. 

Collision coverage: This policy pays for the cost of repairs of your car for damages caused due to any collision. This includes colliding with a tree, pole, another car, wall, etc.

Comprehensive coverage: This policy will cover the cost of repairs for damages due to natural calamities such as floods, earthquakes, fires, hailstorms, projectile damage, and others including theft, riots, vandalism, animal damages, etc.

Personal injury protection plan: In the 12 “no-fault” states, it is mandatory to have a PIP plan. This policy covers the cost of medical treatments needed due to an accident, along with covering up for any lost wages during the treatment period.