What factors impact your auto insurance rates?

Overview

This is not a comprehensive list of factors used to determine your premium, but these are the factors used most frequently by insurance companies.  Because each Insurance Company assigns different weights to these different factors, premiums charged vary widely from one company to the next.  This is why having an insurance broker who represents a variety of Insurance Carriers is often superior to an Insurance Agent who represents only one company.  Let’s examine some of these rating factors.  

Location, Location, Location

Insurance companies typically start by asking for your ZIP code. If you live in a highly populated, urban area, accidents and insurance claims are more prevalent. Living and driving in a metro area will make your rates higher than if you live in a rural area, where having an auto accident due to these factors is less likely.


Based on your ZIP code, Insurance companies know what the rate of stolen cars is in your area, cases of vandalism, number of claims (frequency of fraudulent claims), as well as damaging weather patterns, such as tornados, hail storms, etc.  All of these factors are considered based on your zip code.

Age

Being young is awesome for just about everything except your insurance rate.

Younger inexperienced drivers statistically are easily distracted and crash - a lot - so they are the riskiest category of drivers to insure. Rates tend to decrease around the age of 25.  The Insurance Institute for Highway Safety (IIHS) found that drivers ages 30 to 69 are much less likely to crash. If you keep a clean record, auto insurance rates typically stay fairly flat for drivers until they become a senior driver.


Young and elderly drivers are typically found to pose the most risk and pay more as a result. Studies have shown that senior drivers have slower reflexes, which cause their crash rates to go up. 

Male vs. Female

Most states allow insurers to rate on gender since crash statistics are different for males and females. Sorry Gents, data shows males are more likely to crash - especially in the early years of driving due to aggressive behavior as a beginning driver.


Data shows that men typically drive more miles than women and engage in riskier driving behavior - such as speeding, driving when intoxicated and not using a seat belt. Crashes involving male drivers tend to be more severe than female drivers. Insurers review this information and generally charge more for male drivers as a result of this data.  


That doesn't mean that males will always pay higher rates than females. Gender differences in fatality risk are reduced with age. When men and women enter their 30s, in general auto insurance rates become comparable for both sexes.  But as drivers age into their 60s, rates for males tend to start to increase again over the females as crash statistics again show men of an older age crash more than females.

Married vs. Single

Married couples have been found statistically to be less of a risk to insurance providers than their single and divorced or widowed counterparts. Married couples have been found to be less active and safer than single drivers, resulting in fewer accidents and claims. 

Driver Experience

Inexperienced drivers pose more risk and the rate you pay is going to reflect that. Typically, the number of years of driving experience you have will reduce the price you will pay. Teenagers are the biggest category of inexperienced drivers and also pay the most because of their age and inexperience.  If you have a new teen driver, it is often a good idea to comparison shop when that teen gets a drivers license.  Some carriers are less punitive than others with teen drivers.  Some companies will offer discounts for good student, or for students who are more than 100 miles away at college and don’t have regular possession of their parent’s vehicle.  

Your Driving Record

How safe of a driver you are is really important to your car insurance company because your behavior on the road directly affects your risk to an insurer. This is why so many companies have rolled out discount programs for drivers willing to allow the insurance company to monitor their driving behaviors.  Beware of signing up in you drive a lot between midnight and 4am, slam on your brakes frequently or go from 0 to 60 in 3 seconds.  Drivers with a clean driver's history qualify for better rates and also are eligible for a good/safe driver discount, which typically is pretty good.


Drivers who have an accident or moving violation such as speeding on their motor vehicle record are more of a risk for auto insurers, resulting in higher car insurance rates.


Multiple violations or accidents can make you uninsurable under some car insurance companies' underwriting rules. You can still find insurance, though it may be with a nonstandard insurer and cost you more until the incidents fall off your motor vehicle record.

Claims History

Insurance companies don't just look at your driving record, but also gather reports on what claims you've made with them or previous auto insurers. Don’t think you can be deceitful about it either. Many Insurance companies report your claims into a central database called “CLUE” which is an acronym for Comprehensive Loss Underwriting Exchange.  Before you are approved, your Insurance Agent will run this report and your Motor Vehicle Report.  The number of claims you've had also matters. Numerous claims will signal to auto insurance providers that you are too risky to insure.  This will increase the rate you pay or make you ineligible for insurance with that company.  

Credit History/Insurance Score

Though it may be controversial, research has shown that those with lower credit scores are more likely to file more claims, file inflated claims, and even commit insurance fraud. You'll likely see a hike in your premiums due to a low credit score. If you are looking for ways to improve your insurance score, visit www.insurancescore.com for some tips and tricks.

Previous Insurance Coverage

Insurance companies find that those without a lapse in coverage are less likely to get into an accident, so having a continual auto insurance history can help get you a better rate.  If you were a listed driver on your parent's policy, let your new insurer know so it won't appear that you were without prior coverage when applying for your first individual policy.  Having a lapse in coverage -- even just a day -- can result in higher auto insurance rates.

Vehicle Type & Usage

The type of car you drive impacts your rates since the way in which one drives these types of cars differs. If an insurer's data says that drivers with your model vehicle have been in more accidents or filed more claims, then your rates will be higher.


Additional factors are determined from your vehicle model, purchase price, theft rates, repair rates, accident rates and safety systems.  Just because a car does well on safety tests doesn't mean it will be less expensive to insure. Cars with extra safety features, such as collision-warning systems, may add to the price of insurance if the cost to repair or replace the feature is expensive.  Since many newer cars have back up cameras and sensors, these cars are more expensive to repair.


Insurers also want to know how you're driving your car. A vehicle used to commute to school or work poses more of a risk than the car you only take out of the garage once a week. Personal use of a vehicle costs less than business use, since those using their car for business purposes (such as real estate agents) have a higher chance of being in an accident due to increase driving time.  If you use your vehicle for ridesharing, get a policy which covers that specifically. Business and ridesharing use cost more than personal policies, but that is because the insurer is taking on more risk.  Did you know that some insurance companies use data reported in by the dealership or oil change service facilities that allows them to track miles driven? Some initial discount programs offered by insurance companies can also track miles driven and may impact the rate you eventually pay.

Coverage Limits and Deductibles

Consult with your insurance professional on what limits are right for you.  Higher Liability limits may cost more in your monthly premium, but give you better protection from lawsuits which could save you money in the long run.  Generally, the higher your comprehensive and collision deductibles are the lower your monthly premium will be.  Work with an insurance professional who can provide you with the necessary guidance and expertise.  Remember, when you work with an insurance broker, that trusted individual can help you navigate the claims process and provide advise that you won’t get from working with the carrier directly.