Insurance companies base premium rates on several variables, including your risk of an accident. Your age plays an important role here, with mature drivers having significantly fewer accidents than teenagers. Your car’s safety ratings, popularity with thieves, and repair costs also play a part.
1. Your Age
Insurance companies use your age as a factor when calculating your rates. Young, inexperienced drivers tend to pay higher premiums because their risk of accidents increases more rapidly than that of more seasoned and mature drivers.
Men usually pay more for car insurance than women, although this gap narrows after age 30. When setting rates, insurers will also take your occupation into account; certain professions such as construction or law enforcement could increase premiums as these require high levels of stress and long hours in the driver’s seat.
Considerations include your mileage. Drivers who cover less can qualify for reduced insurance rates.
2. Your Driving Record
As part of their underwriting processes, insurance companies review your CLUE and MVR (motor vehicle report). Major violations like DUIs, reckless driving, and hit-and-run incidents will have an immediate effect on your rates and may lead to denial of coverage altogether. At-fault accidents also raise rates dramatically as insurers consider them indicators of increased risk.
Minor violations such as speeding tickets may also impact your premiums but at a lesser degree than major ones. Maintaining a clean driving record is one of the best ways to lower premiums, so you must monitor it frequently and dispute any mistakes when necessary.
3. Your Vehicle
Your type of vehicle can also affect your insurance rates. A high-performance car designed for speed is more likely to get into an accident than one designed specifically to take kids safely to soccer practice.
Insurance companies take into account factors like safety ratings, repair costs, and features like rear-view cameras or anti-theft devices when setting their rates for you. Other aspects such as annual mileage or comprehensive claims could affect these premiums as well.
4. Your Occupation
Your occupation can have an impactful influence on your car insurance rates, with insurers often asking about it when calculating a quote. Occupations considered lower risk such as teaching and medicine typically see reduced premiums; those working high-stress jobs such as firefighters, paramedics, or police officers may see higher premiums.
Professional athletes and entertainers may experience higher premiums due to the risks they pose with traveling for work and increasing traffic violations and accidents. Conversely, those pursuing a bachelor’s degree or higher could see reduced premiums because insurance companies often assume those with degrees are responsible drivers who use caution behind the wheel.
5. Your Location
Your car insurance rates may be affected by your location, particularly in urban areas with higher theft, vandalism, and accident rates where insurers must pay out more claims due to the higher risk factor.
Traffic congestion, poor road conditions, confusing intersections, and unclear signage are all contributing factors that increase car accident risks in urban areas. Furthermore, some locations may be more prone to extreme weather events that increase claim frequency and insurance premiums; so if you’re thinking of moving, consult your insurer regarding how your new address might influence your car insurance rates.
6. Your Credit Score
Most people understand how their credit score can play a vital role when applying for loans or mortgages, but it can also impact car insurance rates significantly. More specifically, it influences an insurance score used by insurance providers to evaluate risk – and its results can differ considerably from state to state.
Some states, such as California, Hawaii, Massachusetts, and Michigan prohibit insurers from considering credit scores when making underwriting decisions or setting premium rates. Even so, poor credit may still result in higher premiums; thankfully, there are ways you can improve it and lower premium costs by doing so.
7. Your Credit History
Insurance companies consider more than the make and model of a vehicle or driving record when assessing an individual’s risk and setting their premium, according to The Zebra. They often consider their credit score when making their determinations about a person’s premium rate.
Consumers understand how their credit history impacts big-ticket items like mortgages and auto loans; however, many may not realize its effect on car insurance costs as well. Insurance companies use a proprietary scoring system to measure an individual’s risk profile; typically this includes payment history, outstanding debts, length of credit history, and pursuit of new credit accounts. Thankfully, improving one’s credit can significantly lower insurance premiums.
8. Your Car’s Safety Rating
Safety ratings are an essential consideration when purchasing a vehicle. Insurance providers take crash test ratings into account and may offer discounts for cars equipped with superior safety features that help prevent accidents or thefts.
Car safety ratings are determined by two independent bodies – the National Highway Traffic Administration (NHTSA) and the Insurance Institute for Highway Safety (IIHS). They evaluate how well vehicles protect occupants in case of a crash and measure overall vehicle safety on the road.
However, you must keep in mind that safety ratings only compare vehicles of similar sizes and types; thus it’s crucial to consider both passive and active safety ratings when comparing vehicles.
9. Your Driving Habits
Drivers who incur speeding tickets or accidents could see their rates spike significantly, especially if they already have a history of insurance violations. Furthermore, residents of densely populated areas often pay more for car insurance due to higher accident, theft, and vandalism rates.
Good driving practices such as scanning the road ahead for hazards and slowing down when brake lights appear can lower premiums significantly. Conversely, poor habits such as using your phone or applying makeup while driving may increase risks significantly.
Many insurers provide programs to help reduce your car insurance premiums by tracking and eliminating dangerous habits, bundling policies or raising deductibles can also bring about savings.