Seven Factors That Determine Your Car Insurance Rate

car insurance rates

For many drivers, the price they pay each month for their car insurance can be a pretty hefty expense. Many people are forced to pay hundreds of dollars in order to be able to operate their vehicles. Car insurance companies reach the prices for their calculated premiums by taking a plethora of different factors into consideration. There are some of them that you can do something about in order to lower you insurance costs, but others may out of your control or unfeasible to change. Knowing how your premium is calculated, however, will give you a better understanding of the different ways to cut costs.

1. Gender

It might not be fair, but there is no question about it – women pay less than men for car insurance. Sometimes, it can be significantly less. This is often attributed to the fact that women statistically are involved in fewer accidents and are all around safer drivers than men.

This is great news for women out there, but what about for men? Regretfully, apart from pursuing safe-driver and similar discounts from your insurance company, there is not too much that you can do about this one.

2. Marital Status

The premium you pay on your car insurance is directly affected by your marital status. Single drivers are in a higher risk group than those that are married, resulting in higher costs. According to public data, you are less likely to get into an accident after you get tie the knot. Some analysts attribute this to the fact that single drivers often drive more and also that married drivers take fewer risks.

3. Credit Score

If you want to lower your insurance premium then focus on increasing your credit score. For the most part, consumers who have a bad credit score pay 20-50% more for auto insurance than those with a perfect financial history. This is because of the correlation between poor credit scores and a larger number of claims being filed. For drivers with high premiums, working to bring up your score can save hundreds or thousands of dollars a year.

4. Model & Age Of Your Vehicle

What kind of car you drive has a big impact on what you pay. If you have a large, safe vehicle, your coverage will likely be less than if you’re driving a less small, more damage-prone car. The age of your vehicle also can affect your costs. Often times, older vehicles are not equipped with as many modern safety features as newly released ones are.

5. What Kind Of Driving You Do

Believe it or not, the type of driving that you do regularly affects your insurance premiums as well. If you drive infrequently and only go short distances, you’ll pay less than someone who drives hundreds of miles each day for work. If your job demands you be on the road a lot, consider talking with them about expensing a portion of your insurance costs. Better yet, explain to them the benefits of providing you with a work vehicle.

6. Where You Live

Big cities have a lot of traffic. If you live or are moving to a large metropolitan area, expect to pay a higher premium. If you’re looking for a cheaper option, consider moving locales. Residents in more rural areas pay less each month thanks to fewer dangers out on the road.

7. Insurance Coverage History

Have you maintained constant insurance coverage recently? Don’t let your insurance lapse, or gaps in your coverage can end up costing you. This is viewed as risky behavior by the insurance companies and will lead to them not only charging you a reinstating fee if you’re currently lapsed, but also charging youhigher for your coverage to negate the risk.

While these seven factors all go into consideration by the insurance companies when they’re calculating your monthly premium, they are not the only ones on the list. No one knows for sure how these companies calculate their monthly charges, but by understanding as much about your insurance costs as possible, you can make changes that are needed to save you money on your premium.

About The Economist 10 Articles
I am an economist and the founder and owner of Finance Blog Zone

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