Different people can pay wildly different prices for auto insurance, all based on factors that the insurance company uses to calculate premiums. If you know what goes into the underwriting, you can make better choices about your own policy – and perhaps save money in the process.
Your driving record is perhaps the most important factor to consider when shopping for an auto insurance policy. Insurance companies weigh your driving history – in the form of accidents, traffic violations and claims – to determine your level of risk. Drivers with clean records pay less for insurance, while those with speeding tickets or at-fault accidents can expect to pay higher premiums. Keeping a clean driving record is one of the best things you can do to keep your insurance rates low.
A second major factor is your age and sex. Young drivers tend to be involved in more accidents than older, more experienced drivers, so their premiums will be higher. Male drivers, especially young men, also tend to be charged more than females because they are perceived to be higher risk by the insurers.
Where you live also affects your premiums. If you live in a high-traffic area, or in an area with high crime or an overall higher rate of accidents or vehicle thefts, your premium will be higher. Urban areas, where accidents are more common, tend to have higher insurance rates than rural areas. Weather conditions where you live can also contribute to higher prices, because certain climates – such as areas that frequently experience hailstorms or flooding – pose greater risks of damage to your vehicle.
The car you drive is also an important factor. Luxury or sports cars tend to be more expensive to repair or replace, which translates to a higher premium. The same goes for cars with high theft rates. Meanwhile, cars with anti-lock brakes, airbags and automatic emergency braking usually result in lowered premiums as these features make accidents less likely to inflict serious injury.
Your credit score can also affect the cost of your auto premiums. (In many states, insurers may use what is called a credit-based insurance score, which is different from your typical credit score.) A good credit score is indicative of responsible behaviour and may lead to lower rates. A poor one may cost you more money, as the insurance company might consider you a bigger risk.
Your premiums also depend on how much coverage and deductibles you elect. Higher coverage limits or optional coverage such as collision and comprehensive will cost more. Conversely, you can save on premiums by electing a higher deductible — the amount you pay toward any claim before your insurance kicks in. Of course, you’ll want to avoid electing a deductible that you might not be able to afford should you have to pay it yourself in a claim.
Finally, some offer you discounts if you bundle auto insurance with other lines such as home insurance, have a good driving record, complete a defensive-driving course, or install anti-theft devices. Make sure you take advantage of such discounts.
