What 6 Things Determine Your Auto Insurance Rates?

November 06, 2020 by Dan Green

Six questions affect what you’ll pay for auto insurance:

  1. How much auto insurance coverage do you want?
  2. What is your age, gender, and marital status?
  3. Where do you live and work?
  4. What does your driving record look like?
  5. What company handles your auto insurance?
  6. How high is your credit score?

1. How much cash do you want to be paid after a car accident?

Auto insurance pays you cash when you’ve had an accident; and, when your car’s been damaged or stolen. The amount of cash you get depends on the detail of your insurance policy.

Insurance policies are custom. You get to choose how it’s put together.

You can take the minimum amount of auto insurance coverage required by your state, which is your cheapest way to be insured. Or, you can load up on insurance to protect against everything imaginable, which is the most expensive way to be insured.

You can also choose something in-between.

Most auto insurance policies come with six basic protections. As an insured driver, you’re protected against damage to your car and to other cars; injury to you and to others; and, damage to buildings and to structures.

In addition, you’re covered against damage to your car from theft-, random-, and weather-related events; and, against drivers who break the law by carrying too little insurance on their own automobiles.

As the insured driver, it’s your right to ask for additional coverage on these protections beyond just the basics. More coverage means you can get a larger cash payment in the event of an accident.

Extra coverage is a trade-off, though. The more that you request, the more you’ll pay for insurance.

2. What is your age, your gender, and your marital status?

Auto insurance rates vary by age, gender, and marital status. This is because insurance companies price policies based on the chances that you’ll actually make a claim.

Young people make more insurance claims than older people. Men make more insurance claims than women. Single people make more insurance claims than married people.

Age, gender, and marital status affect insurance claims.

  • Woman pay less for auto insurance than men
  • Married drivers pay less for auto insurance than single people
  • Older people pay less for auto insurance than younger people

The differences can be sharp, too.

A 25-year-old woman will generally pay half as much to insure a car as compared to an 18-year-old, and a married 25-year-old woman will pay roughly fifteen percent less.

3. Where do you live and work?

Your auto insurance rates affected by where you live and where you work.

Certain types of homes, such as homes with garages, are linked to lower insurance premiums as compared to homes with street parking only.

This is because garages protect cars from natural elements such as lightning, hail, and wind; and, cars in garages are less susceptible to theft and random damage.

Similarly, car insurance rates drop for drivers with access to gated and garage parking at their place of work.

The distance between your home and work affects insurance, too.

Auto insurance companies don’t typically raise costs for drivers who commute 3 miles or less in each direction, but as the commute to work increases so does the cost to insure.

This is why you should shop for new auto insurance whenever you change jobs — you may be eligible for cheaper insurance.

4. What does your driving record look like?

Your driving record affects what you pay for auto insurance.

Drivers with perfect driving histories pay less for their auto insurance as compared to drivers with a history of speeding tickets, accidents, and DUIs, as examples.

A Growella study of that monitored the effect of driving infractions on auto insurance rates found that even mild speeding tickets can have an out-sized effect on what you pay.

Here is how car insurance costs change for a hypothetical 25-year-old female driver, assuming various driving infractions from five months ago.

  • An 11-15 MPH speeding ticket increases insurance costs 18%
  • An at-fault accident increases insurance costs 41%
  • A DUI offense increases insurance costs 61%

Over time, the effect of moving violations and accidents on your auto insurance rates diminish; your costs decrease with consistent “good driving.”

Major violations, though, can affect your rates for 10 years or longer.

5. What company handles your auto insurance?

Your choice of auto insurance companies affects what you pay for car insurance.

Some companies have a preference for drivers that match your profile while other companies do not. It’s one of the reasons why drivers shop for low rates.

State Farm may already be insuring a lot of automobiles in your area, for example; and, for a lot of people your age and gender with similar driving records. Maybe they’ve hit a quota, so their rates are temporarily high.

Allstate, though, by contrast, may be in search of new customers just like you. As a result, their rates may be lower and the terms more aggressive.

You can’t know where you’ll find the cheapest car insurance until you go looking for it. The cheapest provider today may not be the cheapest tomorrow.

6. What is your credit score?

Auto insurers offer cheaper car insurance to drivers with higher credit scores as compared to drivers with lower credit scores — but not because drivers with higher credit scores are less likely to get in an accident.

Drivers with higher credit scores pay less for auto insurance than drivers with lower credit scores because U.S. auto insurance companies have found a correlation between a driver’s credit score and the likelihood of that driver filing an insurance claim for damages.

Drivers with higher credit scores make fewer claims than drivers with low credit scores, which means they’re less expensive to insure, overall.

Even if you’ve never been in a car accident; even if you’ve never received a ticket for speeding; even if you’ve never made a claim, if your credit score is less than excellent, you’re going to pay a premium on your auto insurance policy.

Credit scores matter when you’re shopping for insurance.

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