Like other types of insurance, car insurance premiums are based on a series of factors that insurance companies set up to determine liability and insurability.
There are a number of key factors used to compute how much you’ll end up paying for your auto insurance. Most things, like age and sex, you can’t control. However, it is important to remember that you can change some of these factors to help drive down costs.
Below we complied a list of the top six factors that affect your car insurance premium and how to lower them.
Basic Demographics
The age, sex, and martial status of an applicant will have a significant effect on their auto insurance. Statistically speaking, younger drivers are more likely to get into an accident. Premiums are high across the board for drivers under the age of 25, especially for young males and single males.
Although you generally can’t change your basic demographics, insurance companies may offer discounts for responsible actions. For example, if you’re a student with a 3.0 GPA, you may qualify for a discount for your success in education. Some states also offer safety courses to young adults to help lower their premiums.
Driving Record
Insurance companies will rate you up if you have a history of reckless driving, traffic violations, and/or arrests. Drivers who cause accidents generally pay more than those who are accident-free for several years.
However, there is good news.
If you recently got into trouble driving, most of the time you can enroll in online or classroom driving school to get the ticket off your record. In most cases, this can only be done once a year.
Type of Driver
Insurance companies will most likely ask you the following questions: how often do you drive and how far do you drive?
People who use their car for business or who have a long commute will generally pay more than those who drive less. The more you drive in a year, the higher the chances of an accident – regardless of how safe a driver you are.
If you fall into this category, try starting a car pool, ride your bike to work, or consider taking public transportation. Not only will you save money on gas, but you may also save money on your insurance premium.
Model of Vehicle
Every car on the market has a vehicle safety rating that is determined by data complied from customer claims and industry safety reports. Your insurance company will use this information to help determine your insurance premiums, as safer cars are rewarded with lower premiums.
Insurance premiums are based on the car’s susceptibility to damage, occupant injury or theft. Lower rates are given to cars that don’t fall victim to these factors.
With this being said, do your research before heading to the dealership and come prepared with a list of questions about a select number of vehicles. Not only will you be educated on the car you purchase, but seem more experienced to the dealer.
Location
Like any other form of insurance, location is a key element. If you live in an urban area, expect to pay more for insurance than those who live in a small town or rural area.
This is due to factors such as:
- Higher Theft Rates
- More Traffic
- Bigger Chance for Vandalism
Additionally, larger cities will have higher premiums than smaller cities. For example, Miami and New Orleans have extremely high premiums, whereas places like Lafayette, Indiana have lower premiums.
Coverage and Deductibles
Finally, the type of policy and additional coverage you desire will determine how much you will pay for auto insurance. Insurance companies have a series of options and your state may not require add-ons you can select from that.
The specific coverage and deductibles play major roles in your monthly premium rate, so be careful what you select.
Generally speaking, selecting a higher deductible will warrant you a lower monthly premium. Choosing a lower deductible means a higher monthly premium.
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