If you have recently gone through the process of reassessing your car insurance policy, you know that it can be a confusing and sometimes frustrating experience. The difference between one company’s quote and another company’s quote can be minimal or massive and it isn’t always easy to compare apples to apples since companies package their products differently. Since most companies use complex actuarial formulas to determine their rates and proprietary processes for quoting, you may not ever be able to understand why two policies that seem the same can carry such different price tags.
However, you do have some control over the cost of your car insurance if you understand how your decisions and your actions can impact the rates insurance companies are willing to give you.
Here is an overview of the 7 most important things that can affect your car insurance rate and which you can change to get a better price.
Unfortunately, some of the factors that contribute to your auto insurance rates are things about you that you can’t change like your age or gender. There are some personal details that affect your rates, like where you live and what you do for a job that can change how much you pay for car insurance. If you are thinking about moving to another town or state, it may be worth it to find out if your insurance rates will be higher or lower in your new location.
2. Your Car
According to the Insurance Information Institute, the cost of your car insurance is driven in part by the car you drive. The insurance company looks at things like the original, replacement, and repair costs, safety rating, and prevalence of theft for your car to determine your rate. This is why it costs more to insure a brand new car even if your driving record and coverage remains the same.
3. Your Driver Profile
Insurance companies also look at how many miles a day you drive to and from work as part of determining how much your policy will cost. The more miles you drive, the more likely it is that you will be in an accident and file a claim which makes your rates higher.
4. Your Driving History
How you drive has a big impact on your car insurance costs. If you have points on your license from past moving violations, your costs will be higher. Companies consider your driving history as an indication of how safe a driver you are and safe drivers don’t do things that result in moving violations.
5. Your Credit History
Depending on the state you live in, your credit history may be a factor in how much you pay for car insurance. Insurance companies believe that people who are conscientious about their financial affairs are less likely to take risks behind the wheel. Additionally, actuarial research has shown that how you manage your money can predict how many insurance claims you are likely to file and how big those claims are likely to be, according to the Insurance Information Institute.
The coverage you choose including limits, deductibles, and exclusions can have a big impact on the price you are going to pay. If you choose comprehensive coverage, your costs will be higher. If you choose a higher deductible, your costs will be lower.
Your auto claim history is also a factor in how much your insurance will cost. If you have a history of claims, your rate will be higher as past claims history can be an indicator of the likelihood of future claims.
While there are many factors that affect your car insurance rate that you cannot control, there are some things you can do to keep your cost low. Drive carefully, stay on top of your credit score, and choose the right coverage for your needs to keep the price you pay for your auto policy as low as possible.
- Personal Factors That Affect Your Credit Score (edmonds.com)
- Car Insurance Rate Factors (dmv.org)
- What Determines The Price of My Auto Insurance Policy (iii.org)