How it works
The Texas Department of Insurance explains that insurers use underwriting to decide whether to sell you a policy and how much to charge. Most companies look at:
- your driving record and claims history,
- where you keep your car,
- the kind of car you drive,
- how you use it, such as commuting or business,
- at some companies, your credit.
Your choices matter too. Higher liability limits and extra coverages add to the price. The Insurance Information Institute notes that the higher your deductible, the lower your premium. Discounts, such as for a good driving record or more than one policy, reduce it.
Premium vs deductible
- Premium: what you pay to keep the policy in force.
- Deductible: what you pay toward a covered claim on your own car before the insurer pays.
Example: you pay a $1,200 premium for the year and have a $500 collision deductible. After a $3,000 covered repair, you pay $500 and the insurer pays $2,500. Accidents and tickets can then raise future premiums, since Texas notes companies charge more after them.
Related terms
Sources
- Texas Department of Insurance, Auto insurance guide definition of premium, underwriting, factors and discounts
- Insurance Information Institute, How much auto coverage do I need? deductibles and their effect on premiums
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