For the majority of people who have to buy car insurance, how exactly the rates are computed is a mystery. They simply accept that rates go up without really understanding why. What insurers actually do is look at statistics and other data to determine the likelihood that particular classes of insured persons will make a claim, and then impose higher rates on those with greater perceived risk factors. Understanding these risk factors can make it easier for you to reduce your rates by changing those that are within your control. Some of these factors may seem unfair, but until laws are passed creating uniform guidelines, you will have to deal with them as they are now.
Age. When it comes to setting premiums, car insurance providers are ageist, but in the opposite direction: young people below the age of 25 are generally charged higher rates because statistics reportedly show that people in this age range get into more accidents. Young male drivers, in particular, are more likely to get hit by high premiums since statistics show they are 200% more likely to get into an accident. Conversely, older people have lower insurance rates. Generally, those who are aged 50 to 74 can enjoy rates that are 5% to 15% lower than drivers aged thirty to fifty.
Gender. Women are perceived to be safer drivers than men and thus, generally pay lower rates. This is not always the case, however, since other demographic factors also come into play. For example, a single woman renting in a moderate-income neighborhood and whose highest educational attainment is a high school diploma pays more than a married woman who owns her own home and has earned a college degree.
Marital status. Statistically, married people get into fewer accidents as compared to the singles. Men are the particular beneficiaries of this risk-factor, since a married man who has a clean driving record can see his rates nearly cut in half.
Teenage drivers. If you have young drivers and add them to your policy, you can see a great increase in your premiums by as much as fifty to a hundred percent. Teen drivers represent a high risk-factor since automobile crashes are the leading cause of death for this group due to their lack of driving experience and immaturity which leads to reckless behavior. If you have to include them in your policy, there are some steps you can take to reduce the risk and ameliorate the effect they have on premiums. You can ask them to delay getting a license until they are eighteen or nineteen and get them to take a safety driving course beforehand.
Your home state. Since some cities are deemed by actuaries as carrying a higher risk for vandalism, accidents or theft, people living there are levied higher auto insurance rates. As of 2014, residents of Detroit, Michigan suffer from some of the highest car insurance premiums in the country, as much as 165% higher than the national average. Other cities whose premiums are higher than the national average are New York (36% more); Miami (34%) and Los Angeles (25%).
Your credit score. An increasing number of providers are now using credit scores as one of the factors to set insurance rates. Despite criticism by consumer advocates of the practice of credit-based insurance scoring, since creditworthiness is not linked with how likely a person is to be in an accident, most carriers continue to do it. Thus, you should take whatever steps you can to keep your credit score
high, including availing of all three free annual credit reports you are entitled to from the major credit bureaus and checking them for
errors that hurt your score.
Profession. Of course, it goes without saying that some jobs are more likely to increase accident risk. For example, delivery drivers are
always on the road and pressured to get to their destination quickly, and thus are more accident-prone. On the other hand, although police and paramedics are also always on the road and even drive fast, they are also seen to be more careful and thus, are given better rates by providers. The best rates are given to ordinary employees who only use their car to drive to work and back and rack up minimal mileage.
The type of vehicle you drive. Most people are aware that expensive cars are also more expensive to insure. However, there are a wide range of other factors that determine the insurance rate of a particular make and model. For example, cars that have high safety ratings cost less to insure, as are larger vehicles which are seen as safer in an accident. There are also models that insurance companies see as more ‘theft-friendly’ based on car theft statistics and thus, have higher premiums. If you are in the market for a new car, you should keep these guidelines in mind when making your choice. And if car insurance rates are a serious concern for you, you might want to consider exchanging your present car with a more ‘insurance-friendly’ model.
Driving history. If you are one of those lucky people who have never been in an accident and never made a claim on their insurance, then you likely are already enjoying low premiums. However, if you have figured in several accidents or given a couple of traffic violation tickets, don’t worry. As long as you keep your record clean and the accident was not serious and did not involve serious injuries, past incidents will stop affecting your rates after three years. However, if you got a DUI slapped on you, it will continue to hurt your premiums for up to ten years. In addition, keep in mind that even getting a speeding ticket can hurt your rates, and if you get enough tickets, you may eventually lose your coverage altogether.
Mileage. The less you use your car, the more savings you can enjoy on premiums. In fact, if you can find ways to leave your car at home and use public transportation to get to work or other places, the better it will be for your rates.
To sum up, the more likely the insurance company sees you as a low risk, the more likely they will charge you lower rates on your car insurance.