There are many factors that can impact your auto insurance costs such as where you live, what you drive, the insurance company, level of coverage, and even your credit score. That's just scratching the surface, much like everything else in life, different companies look for different factors and have different appetite's so by no means is this comprehensive.
These are just the basic factors, this is why there’s no single answer to which insurer is cheaper or better. To find a good deal on car insurance, it’s important to understand what affects your premiums before shopping around. OR leave the work to a high performance Insurance Broker....hint, hint, we know a guy.
Read on to learn about the factors that affect your insurance costs and what you can do to lower your premiums.
Factors that could affect car insurance costs
1. Your driving record
Probably the most important factor that can affect your insurance premiums is your driving record. Tickets, traffic violations and at-fault accidents are seen as a sign of a risky driver and can negatively impact your rates. In some instances, your premiums might increase even when you’re not at fault but have filed a claim. So before you file a claim make sure to talk with your agent/or broker. Some brokers have a different approach when it comes to claims; we like to help you with that process if needed. We will never tell our clients they cannot make a claim. However, we will inform you what may happen in the event of a claim.
2. Your vehicle
The car you drive is another crucial factor that insurers consider. Naturally, it costs more to insure an expensive car since the potential claims would also be more expensive to the insurance company. Insurers use the car’s vehicle identification number (VIN) to assess its mileage, accident history, and other factors to determine your rate. How much you’re expecting to drive in a year is also considered.
3. Your location
Since car insurance is regulated at the state level, the ZIP code of your residence can have a major impact on your premiums.
For example, urban areas statistically have higher rates of accidents and theft, so you can expect to pay more living in a city.
4. Your desired level of coverage
The type and amount of coverage you choose will be reflected in your premiums. While it’s important to make sure you have adequate coverage, going beyond the minimum requirement will also make your car insurance more expensive.
However, coverage is important so don't just drop coverage to save money unless absolutely necessary. That's what you're actually paying for is coverage. Don't just lower coverage to save.
Additionally, insurers will consider your deductible. A lower deductible can increase your premiums but it also means you’ll have to pay less if something happens.
5. Your credit score
Studies have shown that people with lower credit scores tend to file claims more often. Besides, your credit score is predictive of how likely you will pay on time. That’s why the majority of car insurance companies use a credit-based insurance score to determine your rate.
However, an insurer can’t use your credit score as the sole reason for raising your premium or denying/canceling your policy. There are also states that prohibit the practice of using credit history to determine insurance rates including California, Hawaii, and Massachusetts.
6. Other factors
There are some other points that an insurer can consider when determining your rate.
For instance, the insurance company may consider your age, marital status, occupation, previous insurance coverage, and your driving experience.
How to lower car insurance costs
Knowing how insurance rates are determined can help you find ways to get a lower price.
See the tips below to see what you can do to get a better deal when shopping for auto insurance.
OR hire a high performance broker like us! We do all the work for you.
1. Shop around Or hire a broker/agent who does that for you
Comparing quotes and deals from different insurers could save you hundreds of dollars. Plus, it’s a good idea to read reviews about each company to make sure you get good service for your money.
If you’re shopping for car insurance online, you might want to call the companies you’re interested in to see if they offer any discounts that aren’t listed on their website.
2. Improve your credit score
Before buying a policy, check your free credit score to see if it needs some work. If it does, you can improve it by getting caught up on late payments if you have any. Paying down credit card balances and paying your bills on time will also get you back on track.
Another way to increase your score is by using Experian Boost, which allows you to include positive utility and telecom payment history in your Experian credit report. It’s free, and you may see an increase in your score immediately.
3. Consider bundling your policies
Bundling your insurance policies could save you up to 30% in rates. If you own a home or more than one vehicle, you might want to consider getting all of your insurance policies from the same company. Although not guaranteed, it's worth checking with your broker to see if it's possible.
4. Increase your deductible
Raising your deductible might slightly lower your insurance premium as it eliminates some risk for the insurer. However, consider this option only if you know you’ll be able to pay a higher deductible in case of a claim without creating financial difficulties.
Remember that factors that affect your auto insurance premiums can change over time.
It’s recommended to check in on your rate at least every two years and shop around to see if you still have the best deal.
If not, it may be the time to consider switching to take advantage of lower rates elsewhere.