What factors affect car insurance rates?
The biggest factors that affect car insurance rates are state coverage requirements, the age of any driver on the policy, and the car’s make and model. The more coverage you’re required to buy in your state, the more you’ll pay for car insurance, regardless of your age and what car you drive. As for your age, your peers’ driving tendencies can work for or against you, depending on whether they are statistically better or worse than other drivers on the road. And vehicle type matters because insurance companies consider the safety, anti-theft, and repair-cost statistics for all cars they insure.
Those are just a few of the many factors that affect how much each driver pays for car insurance. And their impact is obvious when you look at average car insurance rates.
For example, the average 16-year-old driver pays $7,000 per year for car insurance, while the average 25-year-old only pays 25% of that, and the average 45-year-old pays even less. Drivers in Michigan and New Jersey pay the highest car insurance rates in the country, at roughly $2,800 and $2,400 per year. That's over 60% more than drivers pay in Maine and South Carolina – the states with the lowest car insurance rates, on average. As for the cars themselves, minivans are the cheapest to insure. They’re safe, family-oriented vehicles that aren’t geared towards high speeds and risky behavior – unlike sporty coupes, which have the highest average premium of any car.
Some of the factors that affect car insurance rates are within your control, such as your credit history and whether you’ve ever been convicted of drunk driving. Other factors are at least largely out of your control, like your city’s population density and your age. Either way, it’s worth knowing what affects the sticker price so you can be an informed shopper and hopefully minimize what you ultimately pay.
10 Factors That Affect Car Insurance Rates:
- State requirements. Each state has its own laws about car insurance, with different minimums and different categories of required coverage. The more coverage you’re required to buy, the more expensive your policy is likely to be.
- Age. Young drivers pay more for car insurance, since they are less experienced and more likely to get into an accident. After age 25, a driver’s insurance rates start to decrease. On the other end of the spectrum, senior drivers are often charged more after they pass the age of 65. Not only are older drivers more likely to get into a car accident than younger adults, but they’re also more likely to be injured in a collision.
- Car make and model. Some cars are cheaper to insure than others. Car insurance companies prefer to insure safe vehicles, as they’re less likely to lead to expensive claims. So a car with high safety ratings can get you a bit of a discount. On the other hand, some vehicles are statistically more likely to be stolen, including the Honda Accord and any full-size Ford pickup. They tend to be more expensive to insure as a result.
High-risk violations. Traffic violations and car accidents mean you could see a price jump of anywhere from 20% to 200%, compared to what you were originally paying. The amount that your costs increase depends on a couple things: the severity of your violation and whether you’ve been convicted in the past. Multiple infractions make you a high-risk customer for your insurance company.
Some companies use traffic violations as a factor in car insurance pricing for only three years, while others keep them on your record for longer. It’s worth shopping around again three years after your latest incident, in case you can get a better deal somewhere else.
- Yearly mileage. The more you’re on the road, the more likely it is that you’ll be in an accident. As a result, car insurance companies charge you more if you have a long daily commute. If you only drive for leisure, you’re likely to pay less.
- Credit history. In most states, insurance companies charge you more if you have poor credit or no credit history. But if you live in California, Massachusetts, or Hawaii, you’re in luck; they don’t allow car insurance companies to take your credit score into account. On the other hand, if you have great credit, you can save a little money on car insurance in the other 47 states.
Driving record. Your driving record influences your insurance costs, for better or worse. If you have a clean record, you might end up paying 40% less than drivers with a poor record, thanks in part to the availability of safe-driver discounts. But you’re likely to be charged more if you make a lot of insurance claims, whether or not the accidents are your fault. Even your first accident might raise your rates for the next 3-5 years.
The number of years you’ve been on the road matters, too. For example, new drivers over the age of 25 tend to pay more than their peers who’ve been behind the wheel for years.
- Zip code. Depending on where you work and park your car at night, you might get a small discount (or upcharge) for your street address. Big cities tend to have higher crime rates as well as crowded roads where accidents are commonplace. Rural roads are less congested, and rural areas have less property crime.
- Marital status. Married drivers are statistically the least risky drivers to insure, with up to 50% fewer accidents compared to all other drivers. Let your car insurance company know if you get married, so your wallet can benefit from the positive statistics.
- Gender. In most states, it’s legal to discriminate by gender. Men under the age of 25 pay the most for car insurance, up to 50% more than their older male counterparts and about 15% more than their young female peers. The gender gap evens out once drivers reach their 30’s, with men and women paying comparable rates.
How Time Affects Car Insurance Rates
Car insurance rates tend to rise over time, due to factors such as population growth, increasing healthcare costs, and technological advancements that makes vehicles more expensive to repair. For example, the cost of the average car insurance policy has gone up by about 59% from 2009 to 2019.
Source: Insurance Information Institute
The final cost of your car insurance depends on the insurance coverage and deductible amounts you choose. There are many types of coverage to pick from, and you get to select your deductible for each category. You might be tempted to skimp on coverage to get the lowest possible price. However, any coverage that you don’t buy is an area you’ll need to fund completely out of pocket if you get into an accident.
No medical payments coverage? You’re stuck paying all your hospital bills. No comprehensive insurance? You’re out of luck if a vandal breaks your car’s windows.
If you have your heart set on getting your policy to cost as little as possible upfront, choose the largest deductible you can for each category. That way, you’re protected in case the worst happens, but you’re still saving money.
Lastly, don’t forget to ask your insurance company what discounts are available. Whether it’s bundling your car and home insurance or getting a safe-driver discount, it’s worth asking to make sure you’re not leaving any money on the table.
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