Ever wondered what the driving factors are behind your car insurance premiums? Considering that the average consumer unit spends $1,775 annually to insure a vehicle, chances are that you've asked yourself what motivates insurers to set the prices they do. Brownie points if you know someone with a significantly lower—or higher—bill than you have. What's behind the rate differences, and is there anything you can do to get a better deal?
Auto insurance rates aren't one-size-fits-all. They differ based on a combination of personal and situational elements. But there are ways you can mitigate your costs and get cheaper car insurance. Here's a look at the factors that affect car insurance rates. Take advantage of the ones within your control to secure a policy that fits your budget.
What Factors Influence Your Car Insurance Premium?
There are numerous things that affect car insurance rates, from your driving history to coverage type. Insurers use complex data models to set premiums based on your personal situation and external factors.
Your Driving History
This one's probably not too much of a surprise. Insurers tend to reward drivers with a blemish-free record and charge extra to insure those with a history of tickets. Expect to pay more for your policy if you have an infraction or two in your recent driving history. As time goes by, insurance companies may reduce your premiums as long as you remain ticket-free.
Your Age and Gender
Teens and seniors typically pay more for coverage than middle-aged drivers. Policy costs are highest between the ages of 16 and 24, then drop significantly at age 25. Premiums start to rise again around the age of 70.
Being male may come with a higher insurance tag until you reach your 30s. After that, there is little difference in rates between genders.
Where You Live
Insurers model their rates by zip code. If you live in a zip code with a high rate of accidents and vehicle theft, expect higher premiums. Similarly, areas susceptible to natural disasters like hurricanes present more risk to insurance companies, so you may pay more if you live in one.
Vehicle Type and Usage
Your vehicle's type and worth can influence rates, especially if you purchase comprehensive and collision coverage. That's because if you file a claim, the insurer pays more to repair or replace it. Drivers in the market for a new vehicle should consider shopping for cars with the best insurance rates. Doing so can save you money.
Credit-Based Insurance Score
Your credit score affects insurance rates — sometimes significantly. Drivers with no credit may pay twice as much for insurance as someone with good or excellent credit. If your credit is less than stellar, find ways to build it up. Review your credit report to determine what's impacting your score, and take action to fix it.
Coverage Limits and Deductibles
A basic, minimum liability policy is cheaper than one with higher coverage limits. Adding on comprehensive and collision coverage can also escalate costs. If you prefer additional coverage (or require it to stay compliant with your financing company's terms), setting a higher deductible can help minimize costs.
Insurance History
Insurance history is one of the factors that affect your car insurance rates. If you have any coverage gaps, insurers may wonder why. Similarly, new drivers are unvetted, so insurers may set a higher initial premium until they have more data to assess their driving habits.
Marital Status
Insurers view married drivers as less risky than their single counterparts. Married individuals tend to be older and may have kids they're toting around in the back seat, making them less likely to take risks behind the wheel.
Claims History
Drivers with recent claims typically see higher rates. Even if you filed a claim for an accident or other incident that wasn't your fault, insurers may increase your premiums.
Annual Mileage and Driving Habits
Your risk of an accident increases with the number of miles you drive. If you're a high-mileage driver, expect to pay more for your policy than someone who spends less time behind the wheel.
How to Lower Your Car Insurance Costs
You're clear on what affects car insurance rates. But that doesn't mean you're stuck with high premiums, even if you have a less-than-clean record. Here's how to lower insurance rates so they don't eat up as much of your budget.
- Bundle Your Policies: Many companies offer discounts when you bundle multiple policies, such as homeowners, renters, or auto insurance. Keep all your policies with one insurer to maximize savings.
- Increase Deductibles: Raising your collision and comprehensive deductible from $500 to $1,000 or more lowers your rates.
- Maintain a Clean Driving Record: Get into the habit of following the rules of the road. Avoid speeding and obey road signs. Sign up for a driving refresher course if you have any recent tickets — some insurers may give you a break in your premiums for attending.
- Improve Your Credit: Pay bills on time and avoid taking out loans or credit cards for unnecessary purchases.
- Shop for Insurance Frequently: Insurance premiums vary widely from one company to another. Request quotes from providers often to make sure you're paying a fair price.
Compare Quotes to Find the Best Car Insurance Rate
No matter what factors affect car insurance rates, there are ways to reduce your costs. EverQuote helps with our free, custom insurance comparisons. Try it today to see how much you can save!