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What Affects Your Cost of Car Insurance


If you’ve looked at your car insurance bill recently and noticed that the cost of your insurance has increased, you may be wondering what you did to cause it. We’ve compiled a list of the 13 factors that insurance companies take into account to determine how much your insurance should cost, and what you can do to lower your costs.

  1. Location. Your zip code is a relatively important factor of your base rate insurance. If you live in a busy city where car accidents are more common, your rate will be higher than someone driving and living in a rural area. Insurance companies can also tell the rate of car theft in your area, the risk of bad weather and whether medical and litigation costs are higher in your region.
  2. Age. Everyone knows the younger you are the higher your rates. Since young drivers have statistically proven to be bad drivers, they’re typically a bit riskier to insure. But your rates can drop as much as 20% when you turn 25. Although once you reach age 70, your rates often increase again.
  3. Gender. Crash statistics are different between male and females. Males are more likely to crash, especially when they are younger. Men also tend to drive more often and engage in riskier driving behavior than females. As you age (typically around 30) the difference between what men and women pay for car insurance becomes more comparable.
  4. Marital status. Your marital status actually plays a relatively big part in your insurance rates. Married couples have statistically been found to drive more safely than their counterparts. In fact, single drivers are twice as likely to be involved in a car accident than a married driver. Married drivers can typically have rates 5-15% lower than singles.
  5. Driving experience. Obviously inexperienced drivers are more likely to be involved in a car accident than experienced drivers. Teenagers getting their licenses for the first time expect to pay higher rates because their inexperienced, but an older adult who is getting their license for the first time will also have higher rates due to their lack of driving experience.
  6. Driving record. One of the biggest factors in your car insurance rates is your driving record. Your behavior on the road, directly affects your risk to an insurer. With a clean record you’ll get a much better rate than drivers who have been in accidents or who have gotten multiple speeding tickets. A minor violation, like a speeding ticket or a small accident, can increase your rate by 20-40%. A major violation, like a big accident or a DUI, can likely increase your rate by 100%.
  7. Claims record. Insurers will also check your claims record, whether claims made with another insurer or the company you’re trying to get insurance with. At-fault claims will cause your insurance cost to be higher, while not-at-fault claims typically will not. The number of claims you make is also important. The more claims you’ve had will make it seem as though you are riskier to insure.
  8. Credit history. There has also been research done to show that people with a higher credit score typically tend to be better drivers. Those with lower credit scores have been seen to file more claims, file inflated claims and in extreme circumstances, commit insurance fraud. Although that is not always the case, it’s still one of the factors that insurers use to determine your cost and how risky you are to insure. Depending on your credit history, insurers may ask that you pay your insurance a specific way to avoid the possibility of missing a payment.
  9. Previous insurance coverage. Insurance companies also believe that drivers who’ve never had a lapse in coverage are less likely to get in an accident than those who have gaps in their coverage. Preventing a lapse in coverage, even if it’s just a day, can earn you lower insurance costs. If you are planning to go without coverage for whatever reason, it’s recommended that you find a way to still be insured, such as a non-owner’s auto policy which is relatively inexpensive.
  10. Vehicle type. The type of car affects your insurance. Some car types have statistically been in more accidents or had more issues which increases your rates. Cost of repairs can also affect your car insurance because if something happens, the cost for the insurer to repair will be expensive.
  11. Use of vehicle. Personal use is cheaper than business use. If you use your car for any business reason, you’ll want to double check that it can still be covered under your personal insurance policy. If you do any type of ridesharing you’ll want a separate policy that covers that.
  12. Annual mileage. The less you drive, the less chance you will have an accident. Depending on your average commute, the insurer can determine if you are driving daily from a rural area into a more risky environment of the city.
  13. Car insurance coverage. The more coverage you have with higher limits, the more risk an insurer is taking by insuring you, which costs more to you. Does the extra coverage make sense for your financial situation?

You may not be able to control all of these factors like gender, age, location and marital status; you can control how you drive, the type of vehicle you purchase, and other factors. Focus on upping your credit score, keeping your driver’s record clean and make sure you always have insurance. Also, make sure you shop around at different insurance companies to find the most competitive price.

Sources: Insure, The Balance



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