What Determines My Car Insurance Rate?
Car Insurance. We all have to have it when owning and operating a vehicle but why is everyone’s cost so different? Even you and your spouse may have different rates, what gives? Independent Insurance agents have the ability to plug-in your information and shop multiple companies to find you the best and most affordable rate.
However, there are several factors that determine that rate. Insurance is a calculated risk-based business and companies configure how likely you are to file a claim.
Let’s explore some factors that can determine your auto insurance rate and see how life changes may affect your premium.
Your driving record
When you request a quote from an agent they will ask you about your driving history. Typically, how many accidents you may have been in, the cause of an accident and details on tickets. While this takes place, your driving record is being pulled and inserted into the policy. Based on your overall driving record, insurances companies determine your likeliness of having another accident. The easiest way to get a good rate is to be a safe driver.
Your policy and deductible
The type of policy you buy 100% affects your rate. As liability is the state minimum required, your lien holder may require something different. The amount you want to pay monthly determines how much you will pay when an accident happens. Lower deductible= higher monthly rate. Lower monthly payments= higher deductible. Along with deductible differences, you have an option to add personal injury coverage, towing and rental coverage, medical payment reimbursement, or uninsured motorist, along with several others. All of these amendments reflect on your insurance premium. The best option is to determine how much you can afford if an accident were to happen. Would you be able to pay a $500 deductible or $1000? Would you be able to afford towing fees from the site and the cost of a rental car if necessary? Generally, the more you pay monthly means the less you’ll pay when an accident happens. There are a lot of factors here.
Have you heard red cars get more tickets? Well the make, model and year of your vehicle are determining rate factors. Big trucks can be a little higher to insure because they can cause more damage. Thinking about getting a 2-door sports car? Insurance could cost you due to the high-risk of speeding!
Your age, gender, and marital status
Drivers under the age of 25 or older than 65 are considered higher risk drivers. Also, studies show that men are more likely to speed and get into an accident. Students are seen as responsible and some companies offer students with a B average or higher a student discount. Married couples versus singles are also seen as low-risk. Demographics of all drivers on a policy can have an impact on your insurance rate.
How often and how far you drive
Are you driving all day for work? Maybe you’re a mail a carrier and use your own car. How often and how far you drive daily can contribute to your risk calculator. The more you are on the road the more likely you are to be in an accident. Do you work from home and your car rarely leaves the driveway? You win here!
Where you live
Location is key! Living in a rural area might be in your favor when getting car insurance. Fewer cars on the road =less traffic= fewer accidents. Bigger cities tend to mean more people and more cars and more potential for accidents. Your risk of needing to file a claim also increases if crime rates are high in your neighborhood. Live 5-minutes from the office? This can be in your favor too. The fewer miles you commute daily often lends its self to be low-risk.
Your credit history
Insurance companies offer several types of policies. Monthly- annual- low credit- lower down payment and so on. Your credit can affect your premium. Texas allows your credit to-be ran and considered when selling a policy. According to dmv.org, “Low credit scores have been correlated with risky driving behaviors and poor driving records. This means that if your credit-based insurance score is too low, you face the possibility of being deemed high risk of filing a claim. Majority of car insurance companies may look at the following to calculate your score:
- Payment history.
- Length of credit history.
- Whether you have recently applied for new lines of credit.
- What type of credit you have, e.g., loans, credit card, mortgage. (2018, dmv.org)”
There is not a definite risk- calculator but we’ve given you a good list. Car insurance is a risky business. Nobody wants to use their insurance, but knowing you are covered and protected when an accident happens gives you peace of mind. Take these into consideration the next time there are life changes.