What is the rate class of the Vehicle in Auto insurance?


Rate Class

Rate class is a categorization that is used to indicate the way in which a vehicle is being used by a driver. It is one of the many factors (territory, crash history, etc) that determines the premium needs to be paid for vehicle insurance. If a vehicle is bought and used in a location where the traffic is less, the premium to be paid is relatively less than the locations where the number of vehicles or traffic issues is more. Similarly, the rate class helps the insurance companies to decide different premiums for vehicles being used in different ways.

Some common rate classes are:

  • Pleasure
    A lot of people use vehicles for casual activities and these vehicles fall under the Pleasure rate class. Driving for typical day-to-day activities, like chores, driving kids to school, or going on holiday. The vehicle can be used for up to six days in a calendar month for commuting, business, or delivery under a pleasure use rate class and the vehicle owner may be penalized for breaking this rule. Under some circumstances(such as disruption of public transport), this six-day rule may be amended according to the requirement.
  • Commuting
    A majority of people use their vehicles to commute to the workplace. Driving to work or school, in addition to pleasure use comes under the Commuting rate class. Different rate classes are present depending upon the distance traveled for a commute. The commuting rate class usually has more insurance premiums than the Pleasure rate class. A vehicle can be labeled for commuting rate class simply if the vehicle is regularly drove to a place from home, parked there for quite some time, and then used to go back to the home.
  • Business
    Many businesses own vehicles that are used for their business processes. Such vehicles are covered under the Business rate class as these vehicles face situations different from personal vehicles. These situations include driving for business purposes – for example, a salesperson or realtor who drives to meet with customers, or a taxi or limousine driver. Now if an individual as a professional takes clients for appointments, it can be done under a personal policy. If an attorney takes his clients for a meeting, the primary business will be lawyering and not transporting the people.
  • Delivery
    Driving for delivery. There are different rate classes depending on the type of vehicle, what it delivers and the distance traveled. New kinds of online delivery services consist of companies like Uber Eats, SkipTheDishes, Amazon home delivery, Flipkart, etc. These services may include pick up or drop jobs. In these services a person usually picks up goods, eatables, or products from point A to drop them at point B as instructed by a delivery company. Companies use applications or web portals to register orders from their customers. Location information is provided in the form of an address.

A person must choose the right rate class while insuring a vehicle according to the usage of the vehicle. Choosing a rate class for a vehicle and then using it for a purpose other than allowed in that rate class may lead to complications and the insured might not be able to get a claim for the insured vehicle in case of an accident.

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