There are 8 primary factors that determine what you pay for car insurance.
Some of them of more important than others, however they all play a role. Here they are:
1. Vehicle Type and Features
The kind of car you drive matters a lot when it comes to auto insurance rates, especially when it comes to what you will spend for comprehensive and collision insurance coverage.
As you might imagine, a less expensive “family-car” can cost less to insure than flashy speed racer, but, the “rules” behind what cars cost more to insure are not intuitive. If you’re in the market for a new (or new to you) car, it’s worth your time to contact your insurance company and inquire on what impact the vehicles you are considering will have on your insurance premiums.
TIP: According to the Insurance Institute for Highway Safety (IIHS) the Cadillac Escalade is “more than six times as likely as the average vehicle to be targeted by thieves.” Pick up trucks are another “thief favorite” –the Ford F-250 crew cab 4-wheel-drive comes in second to the Escalade for the most theft claims, and pickups in general have much higher theft losses than passenger cars and SUVs, according to the IIHS
2. Who’s On the Policy (and Where)?
If you’re married, you’ll pay less than a single person. (Again, the statistics show that married folks lead a “tamer” existence than swinging singles). Women are also less risky than men when it comes to auto insurance, and they’ll usually pay a slightly lower premium as a result.
If you are a married couple or in a domestic partnership and are listing two parties on the same policy, ask for a quote which tests which rate will be lower, based on who is named as the PNI.
(Once you discover which person that is, you will obviously want to name the cheaper person first).
You may also be asked who else lives in your home, and whether they will be driving any of the insured vehicles. If they will not, make sure the agent notes these parties as being excluded.
TIP: Ask the agent outright if the other persons you have identified as living in home are factoring into your premium rates. Insurance companies vary on how they handle this issue, and most assume that anyone living in the household who has a license is “fair game” for driving the cars, even if you don’t ask to cover them in your policy. Never assume that just because they’re not driving, doesn’t mean you’re paying for them.
3. The Miles You Log
When it comes to insurance, the miles you drive play a significant role in your auto insurance premiums—and so does the type of miles. Many insurers will consider “pleasure” miles as less risky than commuting miles.
Because commuting miles usually take place when there are more cars on the road, as other drivers make the journey into work and home again. Due to the congestion and fact that drivers are often stressed and hurried, rush hour and peak drive times see far more accidents than “off peak” hours do.
How many miles you drive to and from work each day impacts your rates, too. The general of thumb here is that the fewer miles your commute entails, the lower your premium. If you carpool, ride-share, or ride your bike to work a few times a week, let your auto insurance provider know that, too, as it may help to lower your rates.
TIP: Take a moment to calculate how many miles a week you actually do drive to work. (Most people overstate the miles they drive each day, unintentionally raising their own premium)
4. Driving Record and Experience
This is the main one people think of when they assess what they’ll pay for car insurance.
How long you have been driving, and your driving record history, including past claims, traffic tickets, moving violations and convictions for driving under the influence all play a role in how much you’ll pay for auto insurance.
Those who have not been driving long are considered very risky, not only because they lack experience in how to potentially avoid a collision, they may drive more haphazardly in general.
So, if you are under the age of 26, or you are adding someone who is under that age to your policy, expect your auto insurance premium to increase anywhere from 50 percent or to 100 percent.
TIP: Some auto insurance companies like Zurich, Liberty Mutual, and Progressive offer programs directed just for increasing teen safety behind the wheel, including video cameras and GPS monitors that alert parents when a teen driver makes a driving error. The information, in turn, is evaluated for discounts, according to the III.
5. Location and Lifestyle
Where you live (and more specifically, which zip code you live in) plays a significant role in the auto insurance premium you pay. If your car is parked in a garage, it’s a safer bet for the auto insurance provider than cars that are parked on the street.
City dwellers will usually pay more for auto insurance than suburban dwellers, whose lifestyle is generally considered “safer” and less risky. Risk is also based on the average number of claims made by other drivers, within and near your zip code.
6. Professional Relationships and Academics
You’ve probably realized by now that auto insurance, and what you’ll pay for it, is largely based on how responsible your lifestyle makes you appear to be. That said, certain occupations and a record of academic performance earn discounts on auto insurance. Here are some key discounts to take advantage of when it comes to work and school.
Level of Education: The “weight” your education level carries when it comes to your auto insurance policy varies by provider, but there is some evidence that a lower education level correlates to a higher likelihood that you will file an insurance claim. (In turn, you’re considered more risky, and you’ll pay more for your premium). Being a high school graduate is essentially the “tipping point”; any education beyond that as it relates to a potentially lower rate will depend on the insurer.
Grades: You’ll pay more for auto insurance if you’re under the age of 25, but being a full-time student, and especially one that has good grades (usually defined as a “B” average) can amount to savings of anywhere from 5 to 15 % on your auto insurance rates, so inquire with your agent on potential discounts.
7. Personal Finances
Paying in full: Most insurers will offer a discount (usually about five percent) off the total price of your premium if you’re willing to pay it in full at the start of the policy.
Charging the premium to a credit card that earns you cash back (assuming that you will pay the amount off IN FULL at the end of the statement period) can lead to a savings of nearly ten percent, depending on your cash back reward.
Even charging the amount to a non-rewards credit card with 0 percent interest for six months can lead to savings, if you invest the money you would have spent on the premium into an interest-bearing account (where your deductible money should already be set aside). Mark a calendar to remind yourself to pay the credit card off in full, before interest accrues.
Once you have an idea of what your premium will be, you can start to save money in advance, to always take advantage of the “paid in full” savings.
TIP: Some insurance companies will also offer a discount for early renewal (along with payment) before your current policy expires. Inquire with your provider on any discounts like this, if you intend to stay with them for the next policy term.
8. Credit Score:
As mentioned earlier, your credit score is not the sole determinant of the auto insurance rates you’ll pay—but it is a factor. You can and should obtain a free copy of your credit report and score each year from the three major credit reporting bureaus (Experian, Equifax and TransUnion).
If you notice that your credit score has gone up, take a few moments and shop around for new car insurance rates to gauge whether your increased score has had an impact on your premium. (Make sure to have a copy of your declarations statement so that you know you are comparing “apples to apples” in your existing policy and deductible levels).
Improving your credit score can be a great way to lower what you pay for car insurance.