If you drive a car, purchasing car insurance is necessary. However, drivers don’t often realize why their rates are going up or what they can do to lower their costs. With inflation making it even harder to buy, drive, or maintain your vehicle, you’ll want to save money on insurance.
12 Key Factors That Affect Cost of Car Insurance
Saving on insurance can be as easy as switching to a new insurer or driving safely, but not all rate factors are in your control.
Here are 12 key factors that affect the cost of car insurance.
Unless you live in Hawaii, California, or Massachusetts, credit history is a vital factor insurers use when calculating premiums. Raising your credit score can make a huge difference in your monthly insurance payments, especially if you move from a fair to good (630-730) credit rating.
When it comes to car insurance, new drivers pay more than experienced roadsters. With that said, new drivers are often below the age of 25, and age is more likely to affect what you pay. After 25, your insurance rates begin to decrease until they pass 65, where it increases again.
Some vehicles are less expensive to insure. For example, SUVs and sedans are often the least costly to insure because their cost of repair is lower than other cars. Hondas also benefit from low insurance rates unless you’re driving an Accord, as this model is more likely to be stolen.
Every state has its own way of calculating insurance rates, but this lack of consistency can cause state-minimum coverage to vary by up to 318%. A state’s car insurance requirements are the most significant factors affecting your own insurance rates, with New York being the priciest.
The more you drive, the higher your risk of accidents. For this reason, insurers will charge more if you’re constantly on the road. That’s why it’s important to speak to your insurer if you’re not driving as often. People who drive for work, like truckers or HVAC techs, will have higher rates.
A great driving record can cause you to pay 20% to 40% less on car insurance. That’s because safe drivers are seen as less of a risk. Note that drivers are charged more if they make multiple insurance claims, even if the accidents aren’t their fault, for 3 to 5 years after the claim.
Low-risk violations, such as a parking ticket or running a stop sign, will add demerit points to your license but won’t affect your insurance rates significantly. However, DUIs and hit-and-runs will add 7 to 8 points to your license, depending on your state, impacting your monthly bill.
Drivers with a risky driving behavior history usually require Compulsory Third Party (CTP) insurance, sometimes called a “green slip” in certain places. It’s essential to have this insurance no matter how risky a driver’s behavior has been. CTP insurance covers all passengers in your vehicle, the other vehicle’s driver, and road users like cyclists and pedestrians. Next of kin can also file a claim. Key benefits include medical expenses, payments for loss of income, and funeral costs, but it doesn’t cover damaged property or vehicles. A green slip is not typically an add-on to standard car insurance. Instead, it serves as a mandatory form of insurance in some regions.
Where you live can determine the likelihood of your car being damaged, but insurers look at specific locations and zip codes when setting a price. For example, a Greendale driver would pay nearly 50% more than a Santa Barbara resident, even though they both live in California.
By analyzing data from specific locations and zip codes, insurers can more accurately assess the risks associated with insuring vehicles in those areas. Drivers in higher-risk locations typically pay higher premiums, compensating for the increased likelihood of claims. Conversely, drivers in lower-risk areas may enjoy lower insurance rates because the chances of accidents or damage are reduced. This practice allows insurance companies to tailor their pricing to local conditions and provide a fair risk assessment for each policyholder.
Based on statistics, men are more likely to cause accidents than women, regardless of age. While men do pay more for insurance than women between the ages of 16 to 25, they pay less than women in their 30s, 40s, and 50s. Some states have done away with this factor.
Although the evidence is shaky, some insurers consider married men and women safer drivers than singles. The assumption is that married couples are less aggressive drivers, as they tend to have children in the car with them. Even if you don’t have children, this factor is still applied.
Insurers will offer discounts for being a part of an insurer-recognized association or by taking part in a safe driving course. You’ll also get discounts for not having a restricted license. For example, an SR-22 certificate, which you receive to reinstate your license, charges a fee.
If you drive with a plug-in app that provides accurate driving data to insurance companies, you could save $35 a month, or $420 a year, on car insurance. To get this discount, you must drive with an insurer-approved app and be insured by a company that offers the said discount.
Keep these key factors in mind when choosing a car insurance policy. Strive to implement the best practices, such as improving your driving skills and following traffic laws. That way, you can lower your monthly premiums.