It has been statistically proven that there are different premiums for different aged drivers. Younger drivers usually pay a higher premium for car insurance than other drivers because of their accident rate being higher and because they are inexperienced operating a vehicle. Men particularly have higher accident rates than women do so they have the highest premiums; because of this it is considered more risky to insure. The riskiest drivers also fall under the stigma of adverse selection. These drivers are the ones that will likely need insurance the most because they are the most likely to get into an accident and total their vehicle.

When a vehicle is damaged, the insurance company needs to foot the bill. So that the insurance company can stay in business, insurance companies must then raise that person’s premium. One way for an insurance company to relieve its customers of their high premiums is by rewarding the good drivers and signing contracts with their customers that increase their car insurance deductible. When a customer decides that they would like a higher car insurance deductible, they are taking more of the monetary responsibility to pay for a wrecked vehicle than they would be with a lower deductible. This decreases the insurance company’s vested risk in insuring that driver, and in turn, will reduce its customer’s premium.

Works Cited:

Car Insurance Premium Index, CarInsurance.com http://www.carinsurance.com/Premium-Index.aspx

©2010 CarInsurance.com, Inc. - Online Insurance Marketplace™

Car Insurance Premium Index, CarInsurance.com http://www.carinsurance.com/kb/content17532.aspx

©2010 CarInsurance.com, Inc. - Online Insurance Marketplace™