Some factors that may affect your auto insurance premiums include your car, your driving habits, demographics, and the coverages, limits and deductibles you choose. These factors may include factors such as your age, the anti-theft characteristics of your car, and your driving history. Your driving record includes your history of moving traffic violations and accidents at fault. It's one of the most important factors that determine your car insurance rates.
Auto insurance companies look at your driving history for the past three to five years, depending on your state. If you have caused a car accident or received traffic tickets, expect to pay more for car insurance. Depending on certain factors, your car insurance costs can have a significant impact on your personal finances. While you can save money by finding an affordable insurance company, your premiums may increase over time as you go through certain changes and events in your life.
Find out what makes your car insurance go up. Many companies are only looking for claims made in the last three years. However, some look back five years, and others may look at 10 years of their driving record. If you have a previous car insurance claim, compare insurance and other company rates to see how previous claims affect your premium costs.
Some states have taken steps to limit or prevent auto insurers from using credit history to determine insurance rates. Have you ever wondered how car insurance companies get their rates and why car insurance premiums are different from insurance company to insurance company? In a nutshell, insurance companies collect specific data to determine the degree of risk you pose and the likelihood that you will file a claim. Each company weighs data, rating factors, differently and makes their calculations separately, and that is why insurers have variable rate offers. Information about risk factors affecting auto insurance rates is collected by insurance company by filling out a quote form.
Then, behind the scenes, the company's algorithms are put in place to make an informed estimate of its risk level and calculate its rate quote. The safer you look, the less you pay. The riskier it seems, the more you pay for car insurance. If you walk away from a quote thinking, “why is my car insurance so high? the answer is likely that one of the data points points to you being at greater risk.
Or it could be that the insurance company weighs things in a way that doesn't favor your personal data. Some risk factors may not be obvious, such as your credit history, for example, but insurance companies have statistical data that supports the reasons why they use non-driving rating factors. Marital status does not affect the likelihood of a claim as much as your geographical location does and therefore has less weight for your insurer. Each insurer also weighs factors differently, so auto insurance companies often offer different premiums for the same person.
Insurers also analyze their own claims data as part of this process. A supplier may have fewer claims for your model vehicle and, in turn, offer a lower rate than another auto insurer. Due to the different calculations of each car insurance company, it is essential to go around to get the best price. Your car insurance rates may rise or fall when there is a change in any of these risk factors.
Usually, insurers start by asking for your zip code because where you live is the start of most base rates. If you live in a heavily populated urban area, congestion, accidents and insurance claims are more frequent. Living and driving in a metropolitan area will cause your rates to be higher than if you live in a rural area, where you are less likely to have a car accident due to these factors. From your zip code, auto insurance companies can determine the rate of stolen cars in your area, the cases of vandalism, the number of claims (and fraudulent claims), as well as the damaging weather.
All of this helps them discern the risks associated with insuring you and your car in that zip code. Not all states allow your location to be an important valuation factor. For example, California law requires auto insurance companies to calculate rates based on your driving history, miles traveled annually, and years of experience before considering your geographic location. Young and older drivers are generally considered to pose the greatest risk and, as a result, pay more.
Studies have shown that older drivers have slower reflexes, causing their accident rates to increase. The Centers for Disease Control (CDC) notes that the risk of injury or death in a car accident increases as you age. Rhode Island does qualify based on age, but has regulations to protect older drivers. Rhode Island auto insurance companies can't not renew a policy just because a person is 65 or older.
Most states allow insurers to rate by gender, as accident statistics are different for men and women. Data shows that men are more likely to crash, especially in the early years of driving, when they are known to be more aggressive as novice drivers. The IIHS notes that men generally drive more miles than women and behave more riskily, such as speeding, drunk driving, and not wearing a seat belt. The IIHS also found that crashes involving male drivers tend to be more severe than those involving women.
Insurers review this information and rate accordingly. That doesn't mean that men always pay higher rates than women. Gender differences in risk of death decrease with age. When men and women reach their 30s, car insurance rates generally become comparable for both sexes with many insurers and, according to their own data, may allow men to earn slightly lower rates than women.
But as drivers reach their 60s, rates for men tend to rise again relative to women, as accident statistics again show that older men crash more than women. Married couples have been statistically found to pose a lower risk to insurance providers than their unmarried counterparts (including those who are divorced or widowed). Married couples have been found to be less active and safer than single drivers, resulting in fewer accidents and claims. A study by the National Institute of Health found that single drivers were twice as likely to be in a car accident as married drivers.
In general, car insurance rates can be 5 to 15 percent lower for married couples because of their marital status. Married couples can also receive discounts when they combine their policies, such as a multi-car discount and a multi-policy discount for combining the homeowner's or renter's policy (or other policies) and car insurance with the same company. Teens are the most important category of inexperienced drivers and they also pay more because their age and inexperience are a double blow. A 40-year-old who gets a license is believed to be more mature and conservative than a 16-year-old at the wheel and receives a lower rate.
The more years you are under your belt, the better. Even better for your wallet is if you have a license for many years and have a clean driving record. This combo will allow you to get better rates, as well as discounts for being a good driver. Hawaii limits its insurers to not basing a rating plan on the duration of a person's driving experience, which can be useful for novice drivers' rates.
Drivers who have an accident or traffic violation (speeding, DUI, etc. Usually, a minor offense, such as a speeding ticket, can affect your rates by 20 to 40 percent. In some companies, a first ticket may not incur a surcharge (increased fares), but it will cost you the good driver discount (which can be up to 30 percent). If you have a serious violation, such as a DUI, your rates may go up 100 percent or more due to the combination of lost discounts and higher rates.
Multiple violations or accidents may cause you to be unable to insure under the underwriting rules of some car insurance companies. You can still find insurance, although it may be with a non-standard insurance company that costs you more until the incidents disappear from your motor vehicle registry. The number of complaints you have had is also important. If you have had three claims in three years, auto insurance providers will consider you risky to insure and increase your rates or decide not to renew your policy at the end of the term.
New York also allows surcharges if you have been towed or more accidents within three years, even if the incidents were not normally reloadable. Some accidents and claims make you a riskier driver, so insurers can charge you higher rates, basically. Although it may be controversial, research has shown that those with lower credit scores (typically less than 600) are more likely to file more claims, file inflated claims, and even commit insurance fraud. You're likely to see an increase in your premiums due to a low credit score.
Consumers don't like this practice, and some states prohibit insurers from using credit history as a factor. Your credit score and credit history can also affect how an insurance company allows you to pay for your policy. Since statistics show that customers with low credit scores are more likely to miss a payment, insurers may ask you to pay a large percentage of the policy upfront. Customers with very low credit scores may have to pay the full six- or 12-month premium in advance for the policy to be issued.
North Carolina prohibits insurance companies from using credit scores as the sole basis for canceling a policy or offering a policy, but can use it for discounted rates. Therefore, in North Carolina, having an excellent credit score should result in a discount on your base rate. Insurance companies find that people who don't have a lapse in coverage are less likely to be in an accident, so having an ongoing history of auto insurance can help you get a better rate. It doesn't matter if your previous car insurance policy was from your current insurer or someone else's, although if you maintain continuous coverage with the same company for at least a few years, you'll likely get a loyalty discount as well.
If you were previously on your parents' policy, tell your new insurer so it doesn't look like you didn't have previous coverage when you apply for your first individual policy. Having a lapse in coverage, even just one day, can result not only in higher car insurance rates, but can also cause some states to penalize you. If you are going to sell your car or are going to leave the country for a few years, keep an auto policy for non-owners, which is usually quite cheap. For a stored car, you can see how to reduce coverage to maybe only comprehensive (if you don't have a creditor), but still keep the auto policy active.
The type of car you drive affects your rates, since the way you drive these types of cars differs. If an insurer's data indicates that the drivers of their model vehicle have had more accidents or have filed more claims, their rates will be higher. And just because a car does well in safety tests doesn't mean it's cheap to insure it. Cars with additional safety features, such as collision warning systems, can increase the price of insurance if the cost of repairing or replacing the function is expensive.
For many insurers, there is not enough evidence that the extra features are worth a discount, yet. Some have started offering discounts for advanced security features. Insurers also want to know why you're driving your car. A vehicle used for school or work poses a greater risk than a car that is only taken out of the garage once a week.
Personal use of a vehicle costs less than commercial use, since those who use it for commercial purposes are more likely to suffer an accident due to increased driving time. If you're using your car for business, check to see if it's still covered by your personal auto policy. You may need a commercial or commercial use policy and you may override your personal policy when using your car for business. If you use your vehicle for carpooling, get a policy that specifically covers it.
Business and rideshare policies cost more than personal policies, but that's because the risk the insurer assumes is greater. The less you drive, the less risk you have of an accident. Your insurer may also try to determine from the length of your commute whether you are heading to a metropolitan area from your rural or suburban home. If you live outside of Atlanta, for example, but your commute to work is 30 miles, your insurer may predict that even though your local area is low-risk, your trip to the heart of a densely populated metropolitan area puts you at greater risk.
If annual miles traveled decrease, tell your insurance company; you may be able to save money. The more types of coverage with higher limits you have, the more it will cost you, as the insurer takes additional risk by providing you with more coverage. Check your state's requirements, keep in mind that minimums won't necessarily reduce you in a serious accident, and compare quotes to see if additional coverage and protection are right for your financial situation. You can't control your age or gender, but there are some factors you can control.
Keep a clean driving record, create a good credit score, buy a vehicle whose insurance doesn't break the bank, and choose the right coverages for your needs. Just because your rating factors aren't perfect doesn't mean you can't get better rates. Each insurance company evaluates your risk differently, so make sure you buy once or twice a year. Find the insurer that sets competitive prices for your particular combination of factors.
Rate quotes can vary by hundreds of dollars or more. Strive to keep insurance companies satisfied by presenting fewer risks with the rating factors you can control, and in turn, your wallet will also be happier. It is best to contact the insurance company to ask about any discounts that might apply in your situation. Insurers will check motor vehicle records for any red flags, such as high-risk traffic violations.
Inform your car insurance company if you get married, so your wallet will benefit from positive statistics. If the model you drive is more likely to cause damage in an accident, your liability insurance premium may be higher. If you started driving at age 23, you'll probably pay more for car insurance at age 25 than someone your age who has been driving since age 16.According to the Quote Wizard, an unfair increase in premiums can occur if your insurance provider decides to change the priority of your credit rating. Your marital status is an important factor when it comes to your car insurance premiums because married drivers are statistically the least risky drivers to insure, with up to 50% fewer accidents compared to all other drivers.
A clean driving record helps you get the lowest rates, and many auto insurance companies offer a safe driver discount that could reduce the cost of your policy by 40%. Young drivers can be added to a family policy to help reduce the impact of their high insurance rates. Since fender benders are often minor accidents, your car insurance premium may not go as high as it would after a more serious accident. Property, Casualty, Life and Health Insurance Services Offered through NerdWallet Insurance Services, Inc.
But if you want to reduce your own insurance costs, address as many personal factors as you can. . .