When it comes to car insurance there are many factors that go into determining the cost.
When shopping for car insurance, rates will vary from company-to-company. Ultimately, though, they are taking into consideration the same factors.
Being aware of the factors that affect car insurance rates will help you understand why your rates are what they are.
Coverage
Not surprisingly, higher and lower coverage will cause insurance rates to be higher or lower. Each state has certain requirements for car insurance coverage. If you opt for more than the minimum required coverage, naturally the rates quoted to you will be higher. Additional coverage may include property damage liability, bodily injury liability, or collision coverage.
Car insurance premiums are also reflective of how high the deductible is for a given plan. If a car insurance plan has a high deductible, the monthly premium will be lower than a plan that has a low deductible.
Gender & Age
For a variety of reasons, car insurance rates are higher for drivers under the age of 25. This is due primarily to a lack of experience and the fact that historically accident rates are higher fora ll drivers under the age or 25 regardless of gender.
Women pay less than men for a variety of reasons, including the fact that research shows them as being “costlier” than women due to a variety of statistics. According to esurance the categories that suggest women are safer drivers than men are accidents, speeding, and DUI convictions.
Marital Status
Rates are typically lower if you are married and higher if you are single. The logic behind this is that those who are married will – as a whole – drive safer than those who are single. Research from the National Institutes of Health concluded that those who had never been married were much more likely to get in an accident than those who were married.
The Car You Drive
The type of car that is being insured will factor into the car insurance rate that is provided. Simply put, the higher safety rating a vehicle has, the lower chance of theft a vehicle has, and the older a car is will all lower the car insurance rates provided.
This is a matter of simple math. The safer a car is, the lower the likelihood of a serious injury and subsequent high-dollar insurance claim. Cars that are more likely to be stolen will cost the insurance company more in the long-term than cars that are less likely to be stolen. Finally, newer cars are worth more money and therefore will result in higher claims than older cars.
How Far you Drive
Relatively speaking, the more often someone drives a car the higher likelihood there is that the car will be involved in a crash. Someone who drives their car 1,000 miles a year will be less likely to have a claim than someone who drives their car 10,000 miles.
Where You Live
Those who live in rural areas will have less expensive insurance than those who live in urban areas. The reason is simple: car thefts happen at a higher rate in urban areas. Rates can vary by city and neighborhood as well since crime rates can vary drastically by city.
Driving Record
The fact that car insurance rates typically increase after someone has been involved in an accident is fairly common knowledge. Traffic citations also may trigger a higher rate. This is due to the fact that
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What is the takeaway from all of this? First of all, there are a number of factors that people have no control over. Age and sex are two of them. Likewise, few if any people think about how their car insurance rates will be impacted when they are deciding whether to get married or where they should live.
The one thing people do have control over is what vehicle they drive, how fast they drive, and what coverage they choose. If you want lower car insurance rates it’s best to do three things: shop around for better rates, change your coverage, and make sure you are always driving as safely as possible.
Have you ever looked into lowering your car insurance rate? Have you ever actively changed something (i.e. your coverage, insurance provider, how you drive) to get a lower rate?
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I signed up for online billing a few years ago and saved something like 25%. I also signed up for Allstate Drivewise to save another 10% or so on my minivan.
Great article! I think it answers a lot of questions that people may have about auto insurance rates! :)
I was pretty surprised to see my jump in car insurance from living in small town Wisconsin to Miami. Switching agents was also a big surprise a few years ago, always just went with whatever my parents had. Now I’m just on my wife’s policy and drive from time to time, I’m a train and bus man now.
I haven’t really comparison shopped auto insurance since Geico has almost always been the lowest, but I should check anyway. I took an online defensive driving course which saved me some money. I’ve been looking into getting rid of comprehensive/collision at some point as the value of my car depreciates
Our car insurance rate is very low, and we are still unsure why it’s so low. Whenever we tell anyone what our rate is, they usually look at us and tell us we are lying. Wes used to work at a dealership and even out of everyone he’s ever seen there, our rate always beat everyone!
Holly at ClubThrifty Woah that’s a big savings just for signing up for online billing! I need to shop around and see what other rates I can get for car insurance.
kay ~ lifestylevoices.com Thanks Kay! I’m glad you enjoyed it.
EvenStevenMoney Yeah I can imagine it would be a pretty big jump going from Wisconsin to Miami. I’m definitely considering using the light rail here when it starts going all the way to my work. I just have to decide it the 2-3x as long commute is worth it.
Andrew LivingRichCheaply Hmmm I should look into whether I can get a discount from a defensive driving course. That is something I would be up for.
SenseofCents Glitch in the system, perhaps? I’d enjoy it while you can! Maybe it’s not a glitch, in which case I’m very interested in why it’s so low.
DC @ Young Adult Money SenseofCents It’s been this low for a few years now, and I’ve even asked them why it’s so low and even they are surprised, but they have said it’s correct.
SenseofCents DC @ Young Adult Money That’s so awesome! Think about the thousands you have saved by that low rate. Awesome deal.
And then you’ve got states like Michigan which is the only state that guarantees unlimited personal injury protection. I’m getting killed out here!
I have no problem with the amount I pay to Geico. Even if I didn’t have any discounts I would still be paying under $100 per month.
I recently changed insurance providers and it was amazing how much money I could save. The only other factor I changed was the ‘excess’ you pay when making a claim – I increased this significantly which further reduced the monthly premiums. Should have done this much sooner!
I was pretty shocked when my car insurance nearly doubled when I moved from FL to WA. I shopped around, but ended up sticking with Geico. A couple months ago I switched to MetroMile because they touted city living = low driving mileage = lower insurance. Eh, not sure if I’m a fan because I’m not really saving as much as I thought I would. For me, it seems that location really seems to determine the premium!
Mark at Bare Budget Guy I can’t imagine the rates. They are bad enough here in Minnesota.
Jason @ The Butler Journal Yeah that’s not too bad. I know that it can vary quite a bit depending on what add-on options you have, too.
Jason@Islands of Investing Hmmm I think I could have really benefited from that the past few years as well. I might have to make the change! Kind of like high deductible insurance? haha
believeinabudget From what you and others have said, it really does sound like location is the driving factor. I’m curious what rates I would get in rural Minnesota versus urban Minnesota.