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Factors that affect car insurance rates

How your driving and demographics affect insurance rates and what you can do about it

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Your car insurance company looks at a variety of factors to determine your risk of getting in a car accident — and set your rate. However, factors like your driving record weigh more heavily than others like your job title. To lower your insurance rate, you can offset your risk by focusing on the factors that you can change and that your insurer considers the most important.

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:

🗓️ 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 miles you drive on the road, the more chances you have to get in 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 for insurance 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 the necessary coverage.

💳 Credit

Insurance companies claim that a driver’s credit may correlate with how often they make car insurance claims. Statistics suggest that drivers with low credit file more accident reports, leading insurers to charge higher prices to these drivers. 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. These states don’t use your credit to determine rates.

📝 Driving record

Your driving record directly reflects 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% — 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

Insurers use statistics to figure out how gender plays in to 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 your individual driving habits and by keeping a squeaky clean record.

🏠 Homeownership

This lesser-known insurance factor tells car insurance companies that your income and credit are stable, while also giving an opportunity to bundle policies. Some insurers 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 since your car insurer will deem you a higher risk to insure. Also, working with a nonstandard insurance company in the past could signal that you’re a high-risk driver.

📚 Job and education

Your job factors into insurance rates because it may lead to business travel, long commutes or higher risk if you work long hours. And since jobs often depend on your education, studies show a link between low education or career 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 your car insurance rates and could position you for higher premiums, especially if your state has high insurance requirements.

Plus, your exact address — including where you park — could mean more traffic or high crime, making you an increased risk for claims. The best ways to help this factor are to park in your garage or secured parking area and show off your safe driving through telematics or a safety course.

💍 Marital status

Marriage ties into insurance in several ways because you may be joining policies together and offsetting each other’s driving risk. 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 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.

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

I’m a safe driver. Why did my car insurance rate go up?

Your rate can go up for many reasons, especially if you’ve had a major change such as a change in address or credit score.

The insurance market as a whole also affects your rate since insurance companies are businesses, too. If more people are filing claims, companies may have to raise rates to make up the difference.

Do car insurance rates go up every year?

Rates do tend to climb based on the insurance market and inflation. While this means you’re likely to see rates increase over time, you might experience a rate decrease if the market isn’t good, like during a recession.

What’s the average car insurance premium?

The average premium is around $1,300 per year for a driver with average risk and standard type of vehicle.

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