11 Key Factors That Affect Your Car Insurance Rates
Why is auto insurance so expensive? And what can you do to make it cheaper? The answer lies in your car insurance cost factors.
Every car insurance company has its own secret algorithms for calculating the risk and the cost to insure you. Sometimes, these algorithms don’t seem fair. But it helps to know which factors affect car insurance rates, and what you can do to get the best deal. (Hint: A good place to start is comparing car insurance quotes on Compare.com.)
Car Insurance Cost Factors
1. Your Driving History
Your driving record is one of the most important factors in the cost of your car insurance. That’s because if you have a history of traffic violations or driving-related offenses, insurance companies assume you’re a higher-risk driver, and so they’ll raise your rates.
The amount of the rate hike depends on the insurer, the seriousness of the offense, and the state you live in. For example: North Carolina car insurance premiums can go up 30 percent after an at-fault collision.
How much does driving history affect your car insurance rates? A lot.
What can you do to lower your rates? Time is your friend. If you’re approaching the three-year mark since your last speeding ticket or traffic conviction, you should compare auto insurance quotes to see how much lower your rates can be. Taking a defensive driving class may also lower your rates. One thing you shouldn’t do is lie about your driving history. Before any insurance company actually writes you a policy, they’re going to run your MVR (motor vehicle report), which will show any incidents on your driving record.
2. Your Driving Habits
Insurance companies want to know how many miles you drive in an average day/year and how you use your car: for commuting, pleasure or both. It makes sense: the more you drive, the more likely you are to have an accident.
How much do driving habits affect car insurance rates? The distance and times that you drive can have a major effect on the cost of insurance.
What can you do to lower your rates? If you’re a low-mileage driver (less than 10,000 miles per year), you may opt for cheap pay-per-mile insurance. Or, you can sign up for a telematics program, which lets insurers track your daily driving habits in exchange for discounts. Just be aware that your insurer’s tracking app or device might discover that you brake too hard or speed too much, and your rates might actually rise.
3. Your Credit History
The practice of using your credit score to set auto insurance rates is common, although controversial. In some states, having bad credit will jack up your insurance rates by thousands more than a DUI will. Even if you have credit that’s considered “good,” you’ll pay $214 more per year, on average, than drivers with perfect credit. At least seven states limit or prohibit using credit history as a factor in car insurance costs.
How much does credit history affect your car insurance rates? A lot, unless you live in a state that doesn’t allow it.
What can you do to lower your rates? As you already know, rebuilding credit can take a long time. But why not start now? Opening a secured credit card, where you deposit money with the card issuer to ensure you’ll pay your bills, can help. Try the snowball method to get rid of debt. This means paying off your smallest debt first, then using those payments to attack the next-highest debt, and so on. If your credit was damaged by a crisis out of your control, you can ask your insurance company for an “extraordinary life circumstances exception,” but that’s a long shot.
4. Your Age
Rates are almost always higher for young drivers under 25, and they’re especially high for single males under 25. As you get older, your rates should go down. They’ll begin to creep up again when you turn 65 or 70.
How much does age affect your car insurance rates? Significantly. Age is the single biggest factor affecting car insurance costs if you’re in your teens or early 20s.
What can you do to lower your rates? If you’re a young driver or a senior driver, taking a defensive driving course can help lower insurance rates. If you’re a student and you have a decent GPA, you may be eligible for a good-student discount.
5. Your Gender
Car insurance rates are typically higher for male drivers, and for good reason. According to the Insurance Institute for Highway Safety, men typically drive more miles than women, engage more often in risky driving practices, and cause more serious crashes.
How much does gender affect your car insurance rates? A lot, if you’re young. The disparity between auto insurance rates for men and women is greatest when they’re under 25.
What can you do to lower your rates? Compare car insurance quotes! The Consumer Federation of America found that the effect of gender on insurance rates varied widely by company and geographic area. Sometimes, women with perfect driving records were quoted $100 more than men. That’s why you shouldn’t buy insurance until you’ve looked at multiple quotes side by side.
6. Your Insurance Claim History
Insurance companies don’t like paying claims. So if you’ve recently filed one or more claims for at-fault accidents, your insurer will consider you a high-risk driver and charge you higher rates in the future, or even deny you coverage altogether. Claims related to accidents in which you weren’t at fault should not change your rates.
What about comprehensive claims — those involving damage to your car caused by things like fire, flooding, tornadoes or hurricanes? Comprehensive claims should have a limited effect on car insurance rates, unless you make several such claims.
How much does your claim history affect your car insurance rates? Moderately.
What can you do to lower your rates? If your car suffers a small amount of damage in a collision, weather event or other accident, you may want to consider paying out of pocket for repairs instead of filing a claim. You also can raise your deductible for collision and comprehensive coverage, which will immediately lower your auto insurance rates.
7. Your State and City/County
Auto insurance prices vary wildly by state, because of differences in car insurance laws and requirements. Some states are notorious for super-expensive insurance: Louisiana, Michigan, or Florida are three. Some states have really cheap car insurance, such as Maine, Iowa, and Idaho.
Auto insurers also look closely at your ZIP code. If you live in a congested urban area with higher rates of traffic accidents, vehicle thefts and other crimes, your rates will go up. If you live in a suburban or rural area, your rates should be lower.
How much does where you live affect your car insurance rates? It depends. Where you live can have a significant effect if you live in a state with very high or very low rates, or if you live in a high-crime area.
What can you do to lower your rates? Besides moving, there’s not much you can do. Don’t lie about where your car is kept — that’s insurance fraud, and can land you in a lot of trouble.
8. Your Car Insurance Lapses/Length of Time with Current Insurer
Having a lapse in insurance — a gap in coverage of any length, from a few days to a few years — can raise your car insurance rates. Insurers like to see that you’ve been continuously insured… and you already know that driving without insurance is a really bad idea! If you don’t have a car at the moment, consider getting an affordable non-owners policy.
Sticking with an insurance company for a really long time can raise your premiums too! That’s because rates may creep up over time because of a sneaky policy called price optimization.
How much does a lapse in insurance affect your car insurance rates? A lapse can raise your insurance costs significantly.
What can you do to lower your rates? Avoid car insurance lapses! Also, don’t assume your insurer’s loyalty discount is a good deal. Compare car insurance quotes every year or so to make sure your current company isn’t charging too much.
9. Your Education and Occupation
In many states, insurers consider your level of education and your job when setting insurance premiums. Professionals such as teachers, engineers, accountants and dentists may pay less; people with jobs that don’t require a degree, such as daycare employees and stock clerks, may pay more.
How much do education and occupation affect your car insurance rates? Not much; these are pretty minor insurance cost factors.
What can you do to lower your rates? You could always pursue a degree or a new occupation… but if that’s not in the cards, that’s OK. Just don’t lie about your profession when you’re getting insurance quotes — if your insurer discovers the deception, that could be considered fraud.
10. Your Vehicle Age and Type
The car you drive has a major effect on car insurance rates. Newer cars have better safety features, but their higher value and increased cost to repair can sharply boost the cost to insure them. Vehicles known to be favorite targets for thieves may also be more expensive to insure.
How much does the car you drive affect your car insurance rates? It can have a big effect. Newer luxury and sports cars may be really costly to insure.
What can you do to lower your rates? In general, SUVs, sedans and minivans are less expensive to insure. Don’t forget to mention any anti-theft devices when you’re comparing quotes. If you drive an older car that’s not worth much, consider dropping collision and comprehensive coverage to save money.
11. Your Marital Status
Car insurance rates typically go down when you get married — sometimes by a lot! Not only do you get a bit of a discount for being married, but you’ll see significant savings if you combine your car insurance policies and get a multi-car discount.
How much does marital status affect your car insurance rates? Getting married has a small effect. Combining two policies into one results in bigger savings, especially if you have more than one vehicle on the same policy.
What can you do to lower your rates? We don’t recommend getting hitched just because you want to save money on your insurance. But if you’re getting married, don’t forget to compare quotes for a combined policy.