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6 Things You May Not Know Are Increasing Your Insurance Costs

Devin Nicholls

Many of the factors that determine your insurance costs are things you can’t control. You’ve got all sorts of insurance to purchase, and each one is nuanced. For instance, auto rates are tied to your age and gender. Homeowners insurance rates change by region and even neighborhood.

There are variables you can control too. For instance, your life insurance policy will be less if you quit smoking. Buying a more expensive car means paying more to insure it. Some homeowners policies give you a discount if you install a burglar alarm. Multi-line discounts significantly reduce costs across the board.

There are also little-known discounts that could help you reduce your premiums. If you understand and tap into these effectively, you can get the same coverage for less — sometimes much less.

6 Lesser-Known Things That Affect Your Insurance Costs

How Much You Drive

You may already know about the safe driving monitors available from insurance companies. You plug a little device into your car’s computer, and it tracks how you accelerate and brake, how you take corners, and how fast you typically drive. If your driving meets specific standards, you get a discount.

You can also get a discount if you don’t drive much. Some companies did this before 2020, but many are now responding to customers’ lack of driving because of pandemic lockdowns. If you qualify, you can see a sharp drop in your comprehensive and liability rates.

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Why It Matters

You’re very unlikely to get into a car crash if you’re not driving your car. That reduces the risk and cost of insuring you, so your insurer can afford to reduce the price of offering that insurance. This one’s so obvious it makes us wonder why it wasn’t more commonly available much earlier.

What You Can Do

Call your car insurance provider and ask them how to qualify for a low mileage discount. They will likely have you install a device in your car, an app on your phone, or both. The widget tracks your mileage, while the app has you take photos of your odometer. After a few months of proving you don’t drive much, they’ll apply the discount.

Your Credit Score

If you live in California, Hawaii, Massachusetts, or Michigan, you don’t have to worry about this. The laws there prohibit or strictly limit this for privacy reasons. If you live anywhere else, your insurance rates might go up as your credit score goes down, and vice versa.

This may feel like adding insult to injury. Poor credit already makes your mortgage, car loan, and student loans more expensive. Nonetheless, that’s the way it is.

Why It Matters

Insurance actuaries have run the math and discovered people with poor credit are predictably also higher risks for insurance companies. They engage in riskier behavior and are more likely not to pay insurance bills. Companies have used this data to justify increasing rates for clients with low credit scores.

What You Can Do

If you have good credit, buy your insurance with long-term contracts so you’re at less risk of increased rates if something terrible happens to your credit. If your credit is inferior to start, do what you can to improve your score. Ask your insurance company what the threshold is, and call them as soon as you cross it. Don’t wait even an extra week before getting the decrease you deserve.

Whether You Own a Business or a Dog

These two details can impact your insurance rates. If you run a business from your home that includes clients, vendors, and other strangers coming onto the property, it can increase your premium’s cost. If you own dogs of certain breeds — such as pitbulls, rottweilers, and others considered dangerous — the same can happen.

It can also get worse. If your insurance company doesn’t know about one of these factors and makes a claim that involves it, they can deny your coverage. Either way, business and dog ownership can end up costing you more money than you think.

Why It Matters

People usually think about their homeowners insurance in terms of fires and forms of damage to their homes. Still, almost all policies also include some form of liability coverage in case of a lawsuit. Businesses where people come and go, and breeds that are (rightly or wrongly) considered more likely to bite, make a lawsuit more likely than homes with neither of these factors.

What You Can Do

Shop around. Not every homeowner’s policy has premium hikes for dogs or businesses. Between those that do, the rate increase can vary widely. If you’re like most people, running a home business or owning a favorite dog isn’t something you’re likely to stop because you’ll save a little on your insurance.

How You Pay

Paying for insurance can be confusing. One policy might require an upfront payment for two months, then monthly fees after that. Another might bill you six months at a time upfront, and a third might let you pay monthly in arrears. There’s a lot of variety, even between nearly identical policies under the same insurer.

But one thing is fairly consistent: The fewer times you pay, the lower your rates will be.

Why It Matters

Processing payments costs insurers money. It might be transaction fees from the bank or the labor costs associated with running and recording the funds’ transfers. Six payments of $100 each cost most insurers more than one payment of $600, and they’ll pass those costs on to you. There’s also less risk of nonpayment or slow payment if you cover a half-year in advance than if they’re chasing you every month for their payment.

What You Can Do

Find out how many months’ worth of premium you have to pay in advance to maximize the discount and what the value will be. Then compare the cost of doing so against other uses of that money, such as paying down an outstanding credit card balance. If the math works out, start paying as much as you can in advance.

Your Job and Hobbies

This one is a lot like the business or dog breed entry above, in that if you don’t pay extra on your premiums because of certain activities, you might end up paying in the form of a denied claim. Some jobs, hobbies, and pastimes are dangerous enough for life insurance companies to place them in unique categories. An incomplete list of examples includes:

  • Logging
  • Commercial fishing
  • Aircraft piloting
  • Roofing
  • Farming
  • Mining
  • Garbage collection
  • Truck driving
  • Power line installation and repair
  • Skydiving or BASE jumping
  • Scuba diving
  • Hang gliding
  • Rock climbing
  • Hunting

Why It Matters

Life insurance rates are calculated based on how likely the policyholder is to die before the insurer earns a profit off their premiums. If you work a dangerous job or enjoy a hazardous hobby, that likelihood increases. So will your rates.

What You Can Do

Shop around for companies that don’t increase rates for your particular situation or add the lowest surcharge. Also, look into trade unions, clubs, and associations connected to the job or hobby. They often partner with a company that offers less expensive coverage or a supplemental plan to help members.

The Presence of Water

If your home is near water — whether that’s a river, lake, or coast — you can expect higher homeowners rates than something more inland. The same is true if your house has a swimming pool, jacuzzi, or even a small water feature in the backyard.

Why It Matters

Water can be dangerous, to both people and buildings. Heavy weather over water brings storms and floods, and a leaking hot tub can ruin a deck. Even more tragic is the risk of somebody drowning on any property with standing water. This possibility can impact your liability rates and life insurance.

What You Can Do

The first thing you should do if considering a property with water is determine what kind of coverage is excluded. Many homeowners policies for a property on a flood plain explicitly exclude flood damage from coverage. If you can get coverage, expect it to be more expensive. Include that in your decisions about whether or not you can afford the home.

Final Thought

One final factor that impacts your premiums is the size of the deductible on your policy. Most people know that the higher the deductible, the lower the premium, but that’s not always the entire story.

It’s worth getting full quotes for all deductible levels for every homeowner and auto policy you buy. In many cases, the math is straightforward: The premium increase would only make the lower deductible work if you made a claim every year. Not only is this unlikely, but each claim will further increase your premium, and you’ll never catch up.

In other cases, a lower deductible cost is so low a single claim will justify the expense for several years. We can’t tell you the specifics of every existing policy you have or might get, but it’s worth running the math on all of your options.

About The Author

Devin Nicholls has worked at a national financial institution for two decades, and insurance sales is an area of his expertise.