From 2017 to 2018, the average cost of auto insurance rose by 7.4%. While rates tend to go up due to inflation, there are also other factors that cause rates to change.
For the average consumer, it’s tough to know exactly why your auto insurance premium is now lower or higher. That’s why we’ve put together this guide outlining six primary factors that affect car insurance rates.
Keep reading to learn more.
First and foremost, your age is a big factor when it comes to your auto insurance rates. Younger drivers are known for being riskier than older, more experienced drivers.
Often, this is because they’re immature behind the wheel and get easily distracted. So simply by getting older, your rates can improve. This is especially true when you hit 25 years old.
It’s also important to note than elderly drivers are also a higher risk to insurance companies. This is because senior drivers have higher crash rates due to their slower reflexes.
Once you hit 25, you can expect your rates to stay fairly constant when it comes to your age until you get to your elderly years.
Insurance companies issue rates based on the risk you pose to them. So if you live in an area that’s more prone to car accidents, your rates are going to be higher.
For this reason, your zip code is a key factor in determining your auto rate. If you’ve recently moved, this could be one reason your rate has fluctuated.
The following information can be gathered from your zip code:
- The rate of stolen cars in your area
- The number of claims, both legitimate and fraudulent
- The frequency of damaging weather, including hurricanes, tornadoes, and fire
- Cases of vehicle vandalism
Also, keep in mind that your unique address can impact your rates as well. Do you live in an urban or rural area?
In urban areas, rates typically run higher, since there are more people, more cars, and a higher chance of car accidents and claims. On the other hand, rural areas with fewer people pose a smaller level of risk.
Your Car’s Age
Another big factor in your car insurance rate? The age of your vehicle. Here’s why.
Older cars are more likely to be totaled if they get in an accident. This is because the cost of big repairs often adds up to more than the entire worth of the car, so the owner often decides to get rid of the car instead of investing in all the costly repairs.
If you have a new car (something built within the last 5 years or so), chances are it will be more expensive to cover it. This is because it will cost a lot more to replace a new car than it would to replace an older model.
So if you recently got a new car and added it to your policy, this is a big reason your monthly premium would have increased.
Your Driving Record
In the car insurance world, risk is everything. The better driver you are, the less risk you pose to your insurance company
The opposite is also true. If you have a record full of violations and incidents, your rates are going to be higher.
It’s also important to note that drivers with clean records are often rewarded with an additional good driver discount, giving you even better rates.
If you experience a major violation like a DUI, your rates will go up substantially. This is also true if you rack up multiple speeding violations. In extreme cases, multiple violations and accidents can leave you uninsured depending on your insurance company.
The bottom line? Drive safely, follow the rules, and you’ll be OK.
Your Marital Status
Another one of the factors that affect car insurance rates? Your marital status, believe it or not. That’s because married couples have been found to present a smaller risk to insurance companies.
In fact, one study discovered that single drivers are two times as likely to get in a car accident as married drivers. Often this is because married drivers are less active than single operators.
Your Credit History
Last but not least, consider your credit history. This is another factor that can influence the price of your car insurance coverage.
This is because people with credit scores under 600 have been shown to file more claims and even file inflated claims. Another study found that those with lower credit scores incur more car insurance losses and higher claim payouts, costing insurance companies more money overall.
It’s also important to know that your credit score can change how companies have you pay your policy. Because you’re more likely to miss a payment, they may have you pay a large down payment upfront.
In some cases, they may require the entire 6 or 12-month premium. The lower your credit score, the more likely this will be.
Final Thoughts on Factors That Affect Car Insurance Rates
There you have it: six primary factors that affect car insurance rates. Now that you’ve read through each of these, it’s time to think about your specific situation.
Which of these apply to you? Understanding this will help you know what to expect when it comes to premiums. It will also help you know what type of behavior to avoid so your rates don’t go up.
Have additional questions or concerns? Check out our blog for more information and ideas.