Car insurance rates, or premiums, differ from one person to the next. A wide range of factors defines how much you’ll pay for car insurance. In most cases, risk is the biggest factor in determining the cost of insurance to you. If you are a safe driver, you’ll pay less. Yet what is it that makes a car insurance agency believe you are truly a safe driver? Understanding this could lead to a drop in your insurance rates.
What Factors Determine Your Rate?
Auto insurance rates depend on many variables. Some of them are set by the carriers themselves — based on market trends, inflation and the average cost of claims. However, other factors depend on your car and your driving history. Here’s a look at the most common components defining your rate.
Your Driving Record
Your local Department of Motor Vehicles keeps a record of all moving violations drivers are involved in over the course of their driving history. Individuals involved in any type of moving violation will receive a notation on their report — and, often, the addi
tion of points. The more points you receive, the more likely your driver’s license will be revoked. From an insurance standpoint, the more points you have, the more likely you are a less-than-safe driver.
Common examples of high-risk driving activity from your report may include:
- Speeding tickets
- Reckless operation of a vehicle
- Driving under the influence of drugs or alcohol (impaired driving)
- Driving under suspension
- Involvement in accidents you cause
- The Type of Vehicle You Drive
The vehicle itself is a key part of the costs you’ll pay. If you operate a vehicle that is high value, it will cost the insurance company significantly more to replace it, if lost. As a result, your rates will be higher. This is typical of sports cars, antique vehicles, custom vehicles or other highly valuable vehicles.
However, other factors about your car can reduce your insurance costs. For example, if your vehicle has a security system, GPS tracking system, anti-lock brakes or other modifications, this makes your car safer. As a result, it may help lower your rate.
The Type of Coverage You Have
There are various types of insurance policies available to you. You should choose those that minimize your risks across the board. Having just the legal obligation of liability insurance will keep your costs significantly lower. However, it minimizes the protection you have.
Most drivers should consider:
- Liability insurance
- Comprehensive insurance
- Collision insurance
- Uninsured or underinsured driver coverage
- Medical payments and others
Always work with your agent to customize your policy — never reduce coverage you may need to get a lower rate. That puts your vehicle and your financial security at risk.
Your Age and Gender
Experience matters with driving skill. Drivers who are younger are more prone to be in accidents. Additionally, research indicates males are more likely to be in a car accident or involved in a moving violation than women. As a result, you will pay more if you are younger than age 18 and male. As you get older and maintain a clean record, this improves.
How Much You Drive
Infrequent driving keeps your costs low. College students and seniors who may not drive frequently may pay less than those who commute to school or work each day. The more often you are on the road, the more likely you’ll be involved in an accident.
Your Credit Score and History
Most auto insurance companies focus on responsibility. Those who are responsible with financial management typically are responsible drivers. This comes from research, again. Where applicable by law, insurance companies may use your credit history and credit score to determine how much of a risk you are.
Where You Live
Those who live in areas where more accidents occur are likely to pay more than in cities where they do not happen as often. Insurers are always looking for ways to reduce risk. Drivers who live in smaller communities may be in fewer accidents, reducing the insurer’s risk. This lowers your risk.
How to Reduce Your Auto Insurance Rates
Many of these factors you cannot change. However, those that you can work on may help you qualify for lower insurance rates.
Take a look at these tips to help reduce your costs:
- Maintain a clean driving record. There is no bigger component to keeping your costs down as a driver. Avoid tickets. If you get them, consider taking a safe driver course, if approved by your insurer. This can help you avoid increases.
- Update security on your vehicle. Ensure your vehicle has a security system in place.
- Be sure to lock your vehicle, store it in the garage, and keep it in your
- possession. Claims for theft can cause your rates to rise.
- Focus on your deductible. This is the amount of money you will pay out of pocket before your auto insurance pays on a claim. Be sure it is affordable to you. However, if you can afford a higher deductible — for example, $1,000 instead of $500 — this can reduce your premium costs.
- Bundle any insurance policies you can — including home, life, car, recreational vehicles and others. When you buy multiple policies through the same insurance agency, the overall cost will drop.
- Buy a car understanding what auto insurance rates for it will be. If you are in the market to buy a new vehicle, know what your rates will be. Choose a vehicle that costs less if you do not want to pay higher premiums.
Being a safe driver is by far the most important step you can take to keep your auto insurance rates lower. Also, be sure to compare options. No two insurance companies will offer the same rate to you. The more information you know about your options and the factors impacting your specific rate, the more empowered you can be in finding ways to reduce your costs. Always ask for discounts. Always learn what factors are playing a role in your situation. This gives you important insight you don’t want to overlook.
Author bio: Reid Zaritsky is Senior Vice President of Capital Auto Auction, a family-run business since 1988. He has been with the company since 2009 and has a background in science and engineering. Capital Auto Auction focuses on finding the right vehicles for families of all sizes.
