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Factors that affect car insurance rates

How your driving and demographics play into your premium and what to do about it.

Updated

Your provider looks at a variety of factors to determine your risk of getting into a car accident. Factors like your driving record may weigh more than others like your job title, but you can take actions to offset any high-risk factors.

What factors affect my car insurance rate?

Several factors help to give insurers a well-rounded insight into your experience level, how you drive and accident statistics based on your demographic. Factors your insurer may consider include:

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🗓️ Age

Your age influences rates because studies have shown that younger drivers get into more accidents. In fact, drivers older than 55 pay almost $4,500 less per year than drivers younger than 18.

In the eyes of insurance companies, experience means less risk. One way young drivers can gain experience and reduce that high rate is by taking a safety course. Getting student discounts and staying accident- and violation-free will also help bring your premium down.

⬆️ Annual mileage

The more time you spend on the road, the more chances you have to get into an accident. But if you happen to drive less than the average 13,500 miles per year, you could get a discount on insurance or opt to pay as you go.

🛡️ Coverage

Expect your premium to rise as you add more coverage to your policy, including higher limits, lower deductibles and optional add-ons. But you can reduce that effect by bundling multiple needs like home and auto insurance or opting for only necessary coverage.

💳 Credit

Statistics show that drivers with low credit often make more claims, leading insurers to charge higher prices. Drivers with excellent credit may pay as much as 42% less than drivers with poor credit and 17% less than drivers with fair credit.

However, some states have determined that using credit is biased toward those with higher incomes, including California, Hawaii and Massachusetts and don’t use this measure to determine rates.

📝 Driving record

Your history is a direct reflection of how you drive, and insurers weigh this factor heavily. Depending on variables like the number of accidents or type of driving violation, your rate could jump anywhere from 10% to 50% — and more for DUIs or reckless driving.

If you’re a high-risk driver, you could save money by taking a safety course or looking into a pay-as-you-go policy, which uses telematics to track driving habits.

🧑 Gender

Providers use statistics to figure out how gender plays into driving risk, and those statistics show that younger men have more accidents. However, women actually pay 3% more between ages 31 and 35.

No matter your gender, you can reduce risk by using telematics to show off their individual driving habits and by keeping a squeaky clean record.

🏠 Homeownership

This lesser-known insurance factor tells providers that your income and credit are stable, while also giving an opportunity for bundling policies. Some providers offer homeowner discounts up to 10% for owning your home and more for bundling home and auto insurance.

📄 Insurance history

How many claims you’ve filed and what companies you’ve been insured with previously can affect your rates. At-fault claims typically affect rates more severely. And previously working with a nonstandard insurance company could signal that you’re a high-risk driver.

📚 Job and education

Your job factors into insurance because it may lead to business travel, long commutes or higher risk if you work long hours. And since jobs often depend on education, studies have shown a link between low job and education level and higher premiums. The only way to offset this risk is to go for higher education or let the other factors prove your driving safety.

🗺️ Location

Your address affects rates and could position you for higher premiums. Especially if you live in a state with high insurance requirements, such as higher limits or extra coverage.

Plus, your exact address — including where you park — could mean more traffic or higher crime, which may make you an increased risk for claims. The best way to help this factor is to show off safe driving habits through telematics, a clean history or safety course completion.

💍 Marital status

Marriage ties into insurance in several ways because you may be joining policies together and offsetting each other’s riskier sides. Most married couples pay 10% less than their single friends, and all you have to do is notify your insurer about your married status.

🚗 Vehicle

The type of car you drive and its make and model also affect your premium since cars have differences in theft and safety ratings, body types and engine power. If you’re in the market for a new car, you can lower your rate by picking a cheaper car to insure.

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6 tips to reduce your car insurance risk factors

Drivers seeing high insurance rates due to high-risk factors can take a few steps to find cheaper car insurance.

  1. Get a black box or an app. Try telematics insurance that’s based on your driving, not your demographics.
  2. Shop sensible instead of sporty. Choose a safer car the next time you’re in the market for a new-to-you car.
  3. Hit the books. Take a safety course to prove you’re a safe driver.
  4. Drive safely. A clean driving record can lower your risk profile.
  5. Work on your credit score. You may want to order a copy of your credit report and review it first.
  6. Keep your insurer informed. Update your insurance after major life events that could reduce your rate.

Bottom line

Many factors drive insurance companies to give you a high or low rate, and several include characteristics that you can change or offset. But even if you can’t improve risk factors like your age or location, you can see which providers offer the best rates and compare your options.

Frequently asked questions about car insurance factors

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