Surprised by how much your car insurance costs? Unsure what factors are affecting your premiums?
Figuring out what affects your car insurance rate takes a bit of detective work.
There are at least 12 factors to do with you, your car, where you live, and your driving that can influence what you pay.
The interplay between these different factors is kind of like your auto insurance fingerprint. Few people – if any – will have the exact same combination of these factors.
That’s why your rate could be pretty different what you might see listed as average car insurance rates in your area.
To help you understand why your rates are what they are, here are the major factors that affect your car insurance.
1. Where you live
This isn’t quite ‘location, location, location’, but where you and your car live has a big say on your premiums.
For example, the higher population density of cities will increase your rates. More people means more drivers on roads, so more potential for accidents.
Insurers will also look at crime in your area to establish the risk of your vehicle being stolen or how many other insurance claims they get in your area.
This doesn’t just impact rates between cities, or between rural or urban areas. Location can even affect your insurance rate down to zip code level. If you move neighborhoods within a city, even this could change your rate.
2. Your age
Your auto insurance premiums will change depending on your age. This is because insurers see younger drivers as more likely to be in accidents. According to the Insurance Institute for Highway Safety (IIHS) drivers aged 16-19 are three times more likely to be in a fatal collision than drivers over 20.
The general trend for premiums is that drivers under 25 or so usually pay more. For drivers older than this premiums tend to decrease, rising again only for drivers over 60 or so.
Women tend to see lower insurance premiums than men – particularly at younger ages. Until age 21 male drivers will pay about 20% more, but the picture is much more mixed for drivers over 30.
This is generally to do with the risks posed by younger male drivers. According to the IIHS, male drivers between the ages of 20 and 29 are more than twice as likely to be in a fatal accident.
4. Your driving experience
Similar to age, the idea here is that the longer you have been driving for, the more experienced – and therefore safer – you will be.
So premiums won’t automatically drop once you’re over 25. If you only got your license at 24, you might have to gain a few more years of experience first.
5. If you’re married
Tying the knot can potentially save your money on your premiums. Again insurers view married people as less likely to have accidents.
Some of this is to do with data suggesting that married people get into fewer accidents. For instance, a 2004 study in New Zealand had a substantially higher risk of driver injury than married people.
Married couples can also find savings by combining their policies and bundling types of insurance together.
6. Your driving record
A clean driving record will generally mean lower auto premiums. Anything else has the potential to push your premiums up.
This is because your record is another way an insurance company decides if they think you’re a safe driver.
The impact will depend on whether it is a minor violation, such as a speeding ticket, or major violation such as a DUI.
7. Past insurance claims
Any previous claims you made could play a part – especially if you were the at-fault driver. If you weren’t at fault or if the claim was on your comprehensive policy, the impact on your costs should be lower – in theory.
However research by the Consumer Federation of America (CFA) found that even for not-at-fault claims rates can increase.
The amount of the claim and how many claims you make can also play a part. If you frequently make insurance claims you will seem like a bigger risk to insure
8. Your credit history
It doesn’t seem far, but credit plays a decisive role in your auto insurance. Insurers argue that there is a correlation between credit score and a person’s driving behavior.
However, studies suggest credit has a disproportionate impact on premiums. According to a Consumer Reports study, a poor credit score could push your premiums up more than a DUI would.
9. Previous insurance coverage
Insurers prefer drivers that have a continuous insurance history. It doesn’t have to be with the same insurer, just so long as you were insured
This is particularly key if you are switching car insurance companies. Make sure you have your new insurance set up before you cancel your old one. Otherwise, you risk having a gap in your insurance. Even a short interruption like this could increase your costs.
If you were previously on your parents’ policy , tell your new insurer so it doesn’t look like you had no coverage when applying for your first individual policy.
10. What car you drive
The car you drive can impact your insurance in all kinds of ways.
Firstly, the value of the car. If your car is worth more it will cost more to insure. Since cars depreciate pretty quickly your premiums will be higher for newer cars.
Beyond the value of the car insurers also look at whether that model has been in more accidents, or is stolen more often.
The safety technology also plays a big part – but not just in the way you think.
Yes, insurers look at crash avoidance and crashworthiness of different vehicles. This means what features a car has to help avoid crashes, but also how well a vehicle protects the occupants when a crash happens.
While this can help reduce or mitigate collision damage, the sophisticated features can also make your car more expensive to repair, which pushes premiums up.
11. What you use your car for
The more often you use the car the more you will pay. So if you drive to work every day you will likely pay more than if you just take a few trips each week.
The amount of miles you drive in a year is a key consideration for insurers. However, the impact is mixed. While driving more miles per year generally means higher premiums, CFA research suggests that drivers who don’t drive a lot don’t see major savings in premiums
If you use your car for business reasons, or if you drive for a ride share service you will need to pay more for your insurance.
12. Coverages and deductibles
When you choose different types of coverage or coverage limits you are choosing to buy more or less insurance. Naturally, this impacts how much you will pay for it.
If you have a liability policy with only the state minimum coverage limits, this will cost you less than if you pay for full coverage.
With collision and comprehensive coverage, your deductible will influence your cost. A higher deductible will reduce your premium.
What you can do to keep rates down
There are some of these factors you can’t control. You can’t change your age overnight, or suddenly gain years of driving experience.
But over time building up a solid track record of being a cautious driver can help.
Be smart about what coverage you need. If you have an older car, than opting for liability vs full coverage will keep costs down.
Beyond that, one of the best things you can do is shop around for the best rate.
Cover is here to help. Our app will search from more than 30 providers to find you the cheapest rate giving you a quote in minutes.