What Factors Contribute to Auto Insurance Rates?

Everyone remembers their first car: the way it smelled, the smoothness of the steering wheel and the exhilarating rush of freedom that came with it. Amidst all of this, it can be easy to forget about the less fun aspects of owning a car, like auto insurance. However, finding coverage can be less daunting if you know what factors contribute to rates and what you can do to improve your chances of getting a more affordable premium.

Driving Record

The most important factor auto insurance companies usually consider is your driving record, which houses your history of driving-related violations, convictions, collisions and departmental actions. In most states, points are assigned to your record for particular traffic tickets or other violations. Ideally, you’d maintain a spotless driving record, but if you have a few blemishes on your record, don’t fret. If you drive violation-free for a period of time, your state may deduct the negative points. Moreover, some states will drop points off a set number of years after the violation that caused them, though the amount of time it takes these points to drop off usually varies by the type or seriousness of the violation. It is always a good idea to know what your driving record contains – and that the information is correct – before shopping around for insurance quotes.

Traffic Tickets

Traffic tickets are another major determinant for insurance providers. If you get caught speeding, you can most likely expect to see an increase in your premium. Some companies will even raise your rates, as excessive speeding is correlated with higher accident rates, which makes you a bigger potential risk to the insurance provider. However, if you have a good relationship with your insurance company and a previously clean driving record, they might not raise your rate if it’s only one ticket. Additionally, you may be able to have traffic tickets removed from your record by enrolling in traffic school or taking a driving course.

Accident Claims

Insurance companies also consider the number of accident claims you have filed, regardless of whether you were at fault or not. If you were at fault and the negligence was the result of a traffic violation, you can generally expect a significant jump in your rate. Also, the more claims you file, the more likely your insurance company will detect a pattern and label you as high risk. However, you may be spared from a rate increase if your insurance provider offers an accident forgiveness program, which may save you from being penalized following your first at-fault car accident if you previously had a clean driving record.

Risk of Auto Theft

In addition to accident claims, providers often look at the risk of auto theft when calculating your rate. This means you could pay more for living in a state with a high rate of auto theft or if you drive a vehicle that is commonly stolen.

Auto Insurance Score

Since studies show that a person’s credit-based auto insurance score correlates to their insurance risk, many insurance companies factor in a credit-based score into their review process. These scores are usually based solely off of credit report information, so it’s important to check your report regularly for mistakes. You always have the option to contact your creditors and the credit bureaus to dispute any errors.

Age, Gender, Marital Status and Occupation

Some other factors that could contribute to your rate include your age, gender, marital status and occupation. These may seem random and irrelevant, but it’s important to keep in mind that insurance companies need to predict how big of a risk you may be to them. Statistically, teenage and elderly drivers are more prone to being involved in an accident, so these groups can typically expect higher premiums. Men are also usually charged more because studies have shown that women drive less, take fewer risks, and are not as likely to be involved in accidents. Data also suggests that married drivers drive more safely than their single counterparts, so many companies will take that factor into account. Lastly, your occupation may indicate approximately how much you will be driving, and simply driving a lot increases your risk of having an accident.

Deductibles, Type of Vehicle and Lapses in Coverage

The former factors might be out of your control, but you do have more control over the following factors: deductibles, type of vehicle and gaps in coverage. Generally speaking, a car deductible is what you pay towards a car accident or other insurance claim before your insurer pays the rest. Taking on a higher deductible can substantially reduce your rate. Driving an older, less expensive car also usually results in a cheaper premium since new, expensive cars cost more to repair and replace, and are more susceptible to theft. Finally, having lapses in your auto insurance coverage can be counted against you even if you have a perfect driving record. Generally, people who fall into this group pay higher premiums and have fewer options to choose from, so it is important to always be insured.

Bottom Line

As many factors that are used to determine your auto insurance rates are out of your control, it’s always a good idea to shop around and get quotes from multiple companies, and find out if you qualify for any discounts, like good student or good driver discounts. Just make sure you think twice before you allow several creditors to run a hard inquiry on your credit.

With the best possible coverage, the soft purr of your engine and the wind in your hair will always remain stress-free. And remember, though auto insurance may not be free, Credit Karma always will be!

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