Auto Insurance in Alabama AL

Reader’s Question:

I am just curious why my auto insurance premiums vary from my husband’s. I tried to check his coverage in Alabama and it provides the exact same coverage. Why is this so?

Annie

Birmingham, AL

That’s a very good question, Annie.

I own 3 cars, one for me, one for my wife, and another for my son who’s already in college. In the past, I used to get 3 different auto insurance policies for each car from different companies in Alabama. You are right in saying that rates vary from one company to another even if the coverage would be very much the same.

So why do auto insurance rates vary so greatly from one company to another? I had to ask too why shouldn’t my auto insurance rates be the same for all of my plans when they were providing the exact same coverage. My son’s insurance rate was the most expensive and was not even close to mine.

I had to read about the car insurance tier system. Apparently, many auto insurance companies determine auto insurance rates by a ‘tier system’, in which auto drivers are placed in one of their ‘tiers’. These tiers vary from one auto insurance company to another. One of my insurances had 14 tiers while the others had just two or three. Some have none. I learned too that most auto insurance companies have a 3-tiered system: drivers are classified as preferred, standard, or substandard. The classification would depend on factors like mileage, driver’s license status, driving history, any tickets and violations, or any auto insurance lapses.

After finding out about the tier system, I decided to consolidate my auto insurance plans under one company with the most ideal tier-system for us. That lowered my premium rates tremendously.

Hope that helps!