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When comparing auto insurance coverage options from different companies, you may notice that the rates differ drastically. Each company has different factors that affect car insurance rates more heavily than others. Understanding the factors that may impact what you pay for car insurance can help you get a better sense of what to expect.
Factors That Can Affect Your Car Insurance Rate
The state in which you live and drive will impact which factors can be used to determine your car insurance rates, as certain states ban the use of several factors. However, some of the most common factors that affect car insurance rates include:
- Your age: Younger drivers have less experience than older drivers, making them riskier to insure. However, the rates for seniors also go up, so those who are under the age of 25 and over the age of 65 tend to have the highest rates when age is a significant factor.
- Gender: Most states allow insurance companies to differentiate between female and male drivers, charging men more than women when they’re younger and women more than men as they age. However, data presented by The Zebra shows that certain states do not allow gender to impact insurance costs.
- Marital status: Wallet Hub reports that many major insurance companies offer lower rates to married drivers than single, separated, widowed, and divorced drivers.
- Location: Each state has its own regulations on car insurance, resulting in varying rates between the states. For example, Allstate reports that rates in Louisiana and Michigan cost an average of four times more than the same coverage for drivers in Maine and North Carolina. Your zip code is also a major factor in your rates, as is your neighborhood. Your location determines the potential risk of your vehicle being vandalized or stolen, while drivers in bigger cities with heavier traffic are more likely to be involved in crashes.
- Credit history: Your credit history is another factor used to determine what you will pay for car insurance coverage. Paying your bills on time and maintaining a high credit score will significantly impact your rates in most states, although certain states ban the use of credit history when setting insurance rates. If you live in a state where an insurance company can assess your credit score as a factor in your coverage cost, you could pay as much as double the average if you have poor credit, according to information presented by Nerd Wallet. Money Crashers reports that the reasoning behind this increase in rates is that people with lower credit scores are more likely to file a higher number of claims and more expensive claims than those with higher scores.
- Driving record: Nearly every auto insurance company uses your driving record as a significant factor when setting your rate. Drivers who have violations, including at-fault accidents, traffic tickets, and DUI or DWI will pay more than drivers with clean driving records. Those who are particularly high risk may only be able to obtain coverage through insurance companies that specialize in working with high-risk drivers.
- How much you drive: Those who drive fewer miles on average can often qualify for lower rates since the risk of being involved in an accident is lower. A 40-year-old male who drives an average of 5000 miles in each calendar year can qualify for a rate that is about 6 percent lower than someone of the same age who drives an average of 12,000 miles in a calendar year. Some lower-mileage drivers also choose coverage that allows them to pay per mile, which will track the actual mileage and charge accordingly.
- Your car: When assessing the cost of car insurance, a company will look at other drivers who drive the same vehicle as you and the risk associated with that particular model. If you drive an expensive and/or imported car, the cost to repair it will be higher, resulting in higher rates. If you drive a fast sports car, you might pay more because of the increased risk of a speeding ticket. Additionally, the extent of damage a particular vehicle can cause to another vehicle may also be a factor in car insurance rates.
- Coverage: Not surprisingly, the level of coverage you choose impacts your overall cost. Full-coverage auto insurance policies can be double the cost of policies with more minimal levels of coverage. A full-coverage policy includes comprehensive and collision coverage, which are options designed to cover your car if it is stolen, damaged in a crash regardless of fault, or vandalized. Other add-ons, such as new car replacement or emergency roadside assistance, will increase the cost as well. It’s up to you to determine whether the benefits provided by additional coverage are worth the added cost.
- Occupation: Those working in certain positions or roles may pay higher insurance rates as they are generally more likely to file claims. However, some states have banned the use of occupation in setting insurance rates and other states are considering similar bans.
- Where you park: If you park your car in a garage regularly, it is less likely to be damaged or vandalized than it would if you parked it on the street. The location of where you park your car may impact your auto insurance rate.
- Driving experience: As mentioned, age is a factor in car insurance rates partly because it reflects driving experience. The number of years you have been driving can play a role in what an insurance company will charge you for coverage, and as you continue to rack up more driving experience, your rates can decrease.
- Previous insurance claims: When you file a claim on your insurance policy, your rates may increase when the policy comes up for renewal. A driver with a recent at-fault accident will pay an average of 50 percent more than a driver without an at-fault accident on their record. You may be able to qualify for an add-on known as accident forgiveness, which means your insurance company won’t increase your rates after your first accident. However, this add-on will usually come at an additional cost.
- Trim level: The trim level of your car is another factor that insurance companies consider when setting rates. Models with high-end features, such as a premium sound system or integrated navigation, may cost more to insure because they cost more to replace.
Car insurance rates vary depending on several factors. Be sure to check with multiple companies to determine which one can provide the best rates for your individual situation.
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