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Why are Auto Insurance Quotes so Personal? What Your Insurance Company Knows

Posted on 7 Nov 2014

If you've ever gone online in search for auto insurance quotes, you've probably noticed that the applications ask a lot of questions. Here is the answer to why they get so personal, and what types of information insurance companies know about you.

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When it comes to auto insurance quotes, many people stick with the same company year after year. Although doing so can have some benefits, there also often comes a time when it makes more sense to look for a new insurance company.

Why are Auto Insurance Quotes so Personal? What Your Insurance Company Knows

Whenever you search online for auto insurance quotes, you might notice that they ask a lot of questions – even some that seem completely unrelated to how well you drive. Many people dislike this, whether for privacy concerns or other reasons. However, insurance companies have legitimate reasons for asking for this information.

An insurance company is a business. Whenever you submit a claim, they lose money. Therefore, they like to grant the best (least risky) drivers with the lowest insurance premiums. Insurance companies determine risk through research. This research has shown that many factors not directly related to how well you drive are highly correlated with risk for accidents. This includes younger drivers, as well as things such as low credit scores, marital status, and occupation.

Some people try to leave out information that they don't believe is relevant in order to protect their privacy or perhaps lower their insurance rate. However, if you are involved in an accident and the insurance company finds out you weren't entirely honest on your application, they could potentially refuse to pay your claim. Even if the information left out was minor.

Here is a rundown on the information your insurance company will know about you:

Claims You've Submitted

Your insurance agency will likely receive a report that will tell them about claims you submitted in the past on your home or car insurance policies. There are multiple databases that will provide this information to your insurance company.

You might not even realize what is on these reports, because they follow the house or car, not necessarily the owner. Before buying a house, you can request these reports to see if there is anything that would increase the cost of your home insurance.

Your Driving History

If you've received speeding tickets, DWIs, or other violations, your insurance company will likely be able to get your driving record through the DMV (or DPS) in your state. Not only will they look at this record when you apply, but they will likely check in on it periodically throughout the life of your policy.

People who fall into "risky driver" groups (such as teenagers) might get their record looked at more often than other drivers. Depending on the state you live in, the record might contain only at fault accidents, or it could contain all accidents.

Your Credit History

Although it depends on the state, in many places your insurance company will look at your credit score. There are different types of credit scores, and there is one specifically for insurance called the insurance-based credit score. It attempts to predict the likelihood that a person will submit an insurance claim, and often helps you qualify for insurance discounts. You can look at your credit history and score before applying for insurance to see where you stand.

As with most purchases, the best thing you can do is to research, shop around, find multiple auto insurance quotes, and qualify for discounts. Taking these steps is a great way to make sure you pay the least amount possible for your next insurance policy.