What Determines Car Insurance Rates?
Driver history is just one factor; there are many others.
Your auto insurance payment is not just based on your driving history. Assorted variables come into play that have nothing to do with your accident record or your experience behind the wheel.
Where you live counts. If you reside in a congested big-city neighborhood with an unyielding traffic stream, that could push your premium higher. Certainly, the accident threat is greater there than in a rural area. In addition, high-density neighborhoods may see more vandalism, break-ins, and auto theft than lower-density communities – plus, more car insurance fraud schemes.1
The vehicle you drive factors into the calculation. Yes, a luxury car will commonly cost more to insure than an economy car, but vehicle price is not the only factor. Certain makes and models are stolen more than others: the Honda Civic, the Nissan Altima, and the Toyota Camry are prime targets for auto thieves. If you drive a 4x4 SUV, the insurer may factor in some off-road use, even if you just want to drive it to work, the beach, and the mall. Engine horsepower could also affect your rates.2
If you own a home, your auto insurance premium might be less than that of a renter. Renters are perceived to have more trouble with their household finances than homeowners. Whether this is true or not, the status of being a homeowner is a positive element in auto insurance rate calculation.2
Are you married? That is a plus when it comes to auto insurance rates, because some insurers think married people lead less risky lives than single people. This belief was reinforced back in 2004, when the National Institutes of Health released a study that concluded that single people were twice as likely as married people to get into car accidents. Like it or not, this presumption affects rates.1,2
If you are an older male, your rates might be the lowest. A Consumer Federation of America white paper looked at the rates set by some companies and found that older men (at least in ten cities) paid less than older women. On the other hand, younger men are thought to be the most reckless drivers (and drivers from that demographic are most often the drivers in fatal wrecks).1
Bad credit can mean higher premiums. It can elevate premiums even more than an accident in some states. In three states, this does not apply: California, Hawaii, and Massachusetts. All three bar insurance carriers from hiking auto insurance rates due to personal credit histories.1
Your job (and how you commute to work) may matter. In its 2018 State of Auto Insurance Report, car insurance comparison website The Zebra says that the typical, full-time worker will save about $30 in car insurance costs compared to a part-time worker. Active duty military and veterans tend to pay around $50 less than civilians. If you work from home, that is a positive factor. If you drive a long way to and from work, that is a negative factor. If you commute during peak hours or between 12:00-2:00am, that is another negative factor.2
Insurers run these variables through their own refined algorithms. This is another reason car insurance rates vary so much from carrier to carrier. Compare and contrast and shop around, for one company may give more weight to some factors than others – and the savings found through thorough shopping could be significant.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 - nerdwallet.com/article/5-surprising-factors-inflate-car-insurance-rate [1/8/18]
2 - wisebread.com/7-things-that-affect-your-car-insurance-rates [5/10/18]