Merit Rating
What Does Merit Rating Mean?
A merit rating serves as the foundation for calculating an auto insurance premium. It is determined by a policyholder’s driving record or performance as a vehicle operator. A high merit rating often results in a higher premium. Driving history is only one piece of what factors an insurer weighs when setting car insurance rates, alongside your age, location, vehicle type, and credit.
Insuranceopedia Explains Merit Rating
Insurance covers risk, with higher risks leading to higher premiums for the policyholder, as greater risks mean a potential for greater financial loss for the insurer.
Individuals seeking auto insurance with no history of risk exposure will be charged a more affordable premium. However, if they have committed traffic violations or been involved in accidents, this will lead to a higher merit rating, resulting in a more expensive premium. Even a minor violation can move the needle: see how much a single speeding ticket raises your premium for a sense of what one infraction costs over a three-year surcharge period.
The merit rating plan assigns higher points to those involved in serious driving accidents and may offer discounts to accident-free drivers. If your record has already taken a hit, there are still ways to reduce your auto insurance rate, from defensive driving courses to bundling policies and adjusting your deductible.
