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My car insurance premiums are pretty high. How does an insurance company decide what it is going to charge me?

In order to arrive at a figure for a premium to be paid, the insurance companies go through a process referred to as underwriting to decide if they are going to sell you a policy and how much to charge you for that policy. The amount you pay is called the “premium.”

Many drivers do not know that Texas law requires insurance companies to charge fair and reasonable rates, adequate for the risks covered. If an insurance company’s rates are too high, it can be required to pay refunds. The insurance company can appeal a decision to the Texas Department of Insurance.

There are a number of things that the insurance company takes into consideration when figuring out what rate to charge you. They include:

  • It depends on your age: women under 21 and men under 25 typically have the highest premiums.
  • Driving record and whether or not you have a claims history: if you have a history of accidents or have lots of tickets issues, you may pay a lot more for a policy. And, some companies may refuse to sell you a policy.
  • Rural versus urban living: rates may be higher in a city versus a rural setting largely due to the fact that rural residents are less likely to have their car stolen. If you live in a city, rates tend to be higher because there is a higher chance of having an accident and your car being stolen.
  • Luxury cars may cost more: rates for luxury and sports cars are higher and also cost more to repair.
  • If you use your car for business: rates tend to be higher if you drive your car to work and/or use it for business.
  • What’s your credit score: yes, some insurance companies use your credit score to figure out what to charge you. For more information on this, visit here:

You may be surprised to learn that as a consumer buying insurance, you have “rights.” Your rights are that an insurance company may not:

  • Refuse to sell you insurance or charge you more because of your national origin, race, religion or color
  • Refuse to sell or charge you more due to your marital status, age, gender, geographic location or disability. The exception here is that if the insurance company can show that your disability puts you at a higher risk for loss than others they may insure.
  • Refuse to sell you insurance or charge you more just based on your credit score.

Other Texas Uninsured/Underinsured Motorist FAQs: