Auto insurance is a little like fashion – it must be the right fit and should be comfortable to the wearer. Coverage and services vary from one person to another. The premiums also vary and are unique to individual needs, profession, and characteristics. The rates for two people could differ even when the vehicles’ values are similar. Here is your chance to learn more about the factors that influence car insurance rates.
Some factors like age and gender are out of your hands. Others, like your driving record and credit rating, are within your control. TheTruthAboutInsurance.com states that some factors like how you intend to use the vehicle, for example, commercial vehicles, can also affect the auto insurance rate.
Read on and learn more about the factors that affect car insurance rates and the intricacies behind them.
1. Age and gender
Although it is totally out of your hands, age is perhaps the most significant rating factor. Younger drivers are considered riskier, thus paying a higher insurance rate.
Teen drivers incur the highest insurance rates and people in their mid-lives (about 50 years) pay the lowest rates. Teen drivers could pay up to $5,500 per year more than drivers in their mid-life stage.
Car insurance companies base such decisions on facts. According to the Association for Safe International Road Travel (ASIRT), Road accidents are the leading cause of death in the US for people under 54 years. More than half of these deaths are healthy young adults aged 15 – 44. The CDC paints a grim picture of the reality; each day, about seven teens aged 13 – 19 die due to automobile crashes.
With such statistics, it is easy to see why insurers charge younger drivers higher premiums. But the question is, why do auto insurers charge senior drivers higher than people in their 50s?
It turns out that many auto insurers still carry the belief that seniors, especially those over 70, have slower reflexes and dulled senses. They are more of a risk on the road compared to drivers in their 50s and 60s. However, emerging studies show that seniors are safer drivers. Also, seniors have had a significant reduction in auto accident rates than their younger counterparts. Perhaps with this new information, auto insurance companies will reconsider premium rates for senior drivers.
Gender is the other aspect that could affect your auto insurance rate yet, out of your hands. There are some states where this practice is outlawed. However, in the jurisdictions where it is permitted, men will typically pay higher rates when they are younger. Women will pay higher rates when they are older.
2. Where you live, what you do, and how you manage your finances
Since each state in the US is semi-autonomous, auto insurance laws vary from one state to another. Therefore, insurance rates vary depending on your location. The latest analysis shows that if you live in Michigan, the average auto insurance rate is well over $5,000. The average auto insurance rate in states like Iowa, South Dakota and Wyoming, is well below $500. The rates could also vary even within a state. Drivers who live in rural areas pay less than those in cities and urban centers. Why? There is a higher chance of your car being hit, vandalized, or stolen when you live in towns than a driver who lives in rural areas.
Apart from where you live, your job and how you manage your finances also matter to car insurers. Some insurers considerurance rate. careers like home healthcare workers or US army veterans when computing the premium. Also, in some states, insurers apply credit score insurance ratings. A better credit score translates to a lower auto insurance rate and vice versa. However, in California, Hawaii, Massachusetts, Michigan, and Washington, it is illegal.
You may have no control over your age or gender. It is also hard to change some things like where you live and your career. But you have total control over your driver’s license and driving history.
Auto insurers consider how long you have held the driver’s license (how many years you have been actively driving) and whether you have had endorsements.
If you have held your driver’s license for longer, you will enjoy better insurance rates than a newbie driver. On the other hand, a tainted driving record will mean you are a higher risk to insurers. Thus your auto insurance rate will be higher.
3. Your relationship with auto insurers
Auto insurance companies value the relationship they have with their clients. However, depending on the length of your relationship, your consistency, and the demands you make, they will vary your premiums rates.
Insurers perceive first-time buyers as riskier. Thus, they pay more. On the other hand, if you have had an inconsistent relationship – your record has periods of coverage breaks, the insurer will interpret it as an indicator of higher risk. They perceive it as a period when you were driving while uninsured. In addition, if you have a history of several insurance claims (or claims filed against you), expect a higher premium rate.
Factors hat influence your car insurance rate – a final word
More factors within your control affect your car insurance rate. Now that you know which ones, adjust your driving style and how you relate with insurers to keep your premiums in check.