When determining the price of your insurance, companies will consider characteristics of you and your car that relate to predictions about future claims. The less risky your insurer considers you to be, the less you’ll pay for your car insurance.
Below are some of the most common characteristics considered by insurance companies to determine your car insurance rate, and a few tips that might help you lower that rate.
Demographics
Age. Young drivers generally pay more for car insurance than middle-aged drivers, since they are considered less experienced and more likely to get into an accident. Older drivers are often charged more than middle aged drivers as well.
Marital status. If you are married, insurers consider you lower risk, and statistics show married people have lower rates of claims.
Make and model of your vehicle. Insurers use the make and model of your car to make predictions about the damage it may cause or sustain in the case of an accident, and the costs associated with repairs. Large, heavy vehicles may sometimes better protect those inside in a collision but can also cause more extensive damage and injury to others. Vehicles with extra safety features such as lane departure warning systems and brake assist are usually considered lower risk than those without.
Vehicle use. If you drive a lot, your insurance company considers you a higher risk driver than someone who is rarely on the road.
Geographic territory. In general, a driver who lives in an urban area will pay more than a similar driver who lives in a rural area. Urban areas typically have more traffic than rural areas.
Household makeup. If you live with higher insurance-risk individuals, like a teenager who has begun driving or elderly parents, you may pay higher rates.
Homeownership status. Insurers may consider homeowners lower risk than renters and adjust rates accordingly.
Driving Record
Insurers see your past driving record as a useful predictor of your future driving. Therefore, drivers with previous violations or accidents that resulted in claims are considered higher risk.
Traffic violations, at-fault accidents, and paid claims can increase the cost of your car insurance. The amount your rates increase may depend on the severity and number of these types of incidents. Your rate increase can vary greatly by company too.
Keep in mind that you’re also likely to have a higher rate if you’ve had multiple car insurance claims paid in the past – even if the accidents weren’t your fault. However, companies often limit how far back they consider your past claims.
Prior Insurance Coverage
Your insurance history may affect your rates. If you’ve been driving uninsured, some companies may charge you higher rates. Carrying higher limits on your most recent policy may result in lower rates. Additionally, if you have had a previous policy canceled for not paying your premium, this will affect your rate.
Credit History
Your credit history is a factor companies often use when calculating your rate. Drivers with high credit scores often pay less than similar drivers with low credit scores.
Tips for lowering your rate:
Most companies offer discounts. Discounts may include things like taking defensive driving or driver’s education classes, maintaining a good driving record, participating in an optional telematics program, getting good grades in school (for high school and college-aged drivers), having more than one car on a policy, and having multiple policies with the same company. Ask your company what types of discounts they offer.
If you’ve recently repaired your credit, make sure to let your insurance company know and see if they will re-run your credit score and adjust your rate accordingly.
If you’ve recently experienced any of the following hardships that negatively affected your credit score, you can ask your insurer to take these things into consideration when calculating your insurance rate.
- Illness or injury
- Death of a spouse, child, or parent
- Temporary loss of a job
- Divorce
- Identity theft
When shopping for a new car, you may want to ask an insurance agent what make and model cars are associated with lower rates. You can also ask your insurance agent about the rate impact of the cars you are considering buying.
If you have numerous violations on your driving record, it is worth shopping around. The impact of your driving record on your insurance rates varies greatly from company to company, so you may be able to save significantly by switching insurers.
If you don’t drive often, a usage-based insurance (UBI) policy might be a good option for you to save money. Read our article about UBI to learn more.