There are many factors that affect your car insurance rates, including:
- Where you live
- Your credit history;
- Your driving history; and
- The type of car you drive.
Another Important Factor: Household Rating
Another of these factors is household rating. Without knowing all household members and frequent drivers of your cars, an insurance company cannot properly calculate the risk and therefore premium to be charged for the policy. Most insurance companies assume every licensed driver in your household could drive your car. So even if only one of the family’s five drivers has a bad driving record, this could impact the cost of insurance for all the family members.
What defines someone as a household member for car insurance purposes?
In general, an immediate or extended family that lives with you as well as non-family household members that drive your vehicle, such as a roommate, can be considered a member of your household by a car insurance carrier.
However, the definition of a household member can vary from one insurance company to the next due to different underwriting rules and guidelines that each carrier has in place, as well as the language (terms) of your auto insurance policy.
There also can be differences in state laws that help to define who is considered a household member and should be listed on, and covered by, a car insurance policy.
The Underwriting Process
Since a policy normally provides coverage for the named insured and other drivers who live in the same household, an insurer will request information on the other drivers when considering whether to sell a policy. During its underwriting process, an insurer assesses the risk presented and determines whether it wants to write that risk (meaning issue a policy). If an insurance provider decides that it is willing to write the risk, it calculates the premium to be charged for the policy.
Other drivers living in the household impacts the insurer’s underwriting evaluation. The insurer needs to know how the vehicle to be insured will be used before deciding to issue a policy. Not telling the insurance company about a household member is misrepresentation, a form of insurance fraud.
What if You Don’t Want a Household Member on your Policy?
If you have a household member that you do not want to be on your policy and he or she will not be driving your vehicle, you may be able to exclude the person from your policy if your state laws allow it. However, your insurance company still needs to be aware of the person as a household member so that he or she can be specifically included or excluded from your policy. If a person is excluded from your car insurance policy this means that he or she will not have any coverage extended to them, even if driving your vehicle in an emergency situation.
Why Use Household Rating?
Household rating can seem annoying. Why should your auto insurance be affected by the driving history of a roommate or girlfriend/boyfriend living with you that has their own car insurance? However, everyone in your household should normally be listed on your car insurance policy. You need to disclose all household members when applying for car insurance.
Typically, an auto insurance company will then use the information you have given to include drivers on the policy, exclude drivers from the policy, or not rate certain people on the policy. While all household members should be known to the car insurance company, they do not necessarily have to be listed as covered drivers depending upon the situation.
Household Rating: Pro’s and Con’s
So, even though household rating can seem like a nuisance where the end result can mean higher premiums, the opposite is true as well. For example, if your roommate has a good driving record, your premiums could be lower. Basically, if the other person has a good record or at least a decent record, you are going to get a very competitive premium on your insurance.