Car insurance rates can seem like a puzzle to understand. Why is it that with one company, you may be quoted a really high premium, but with another, your rates may be significantly lower? You’d think surely there has to be a science to make sense of it. And you’re correct. There is a science to how car insurance companies calculate car insurance premiums. But not every insurance company uses the same equation, which is why quotes may vary a little or even significantly.
But across all insurance companies, there are certain factors that affect your car insurance rates. These factors may hold heavier, lighter, or similar weights in the equation when calculating how much money you should be paying for insurance coverage with each company. No one wants to pay a higher premium than necessary. Therefore, it’s essential to know which factors can affect you and if there is a possibility that you can affect or make changes to any factors to help lower your premiums.
To help you understand your insurance costs, let’s take a brief look at what factors determine your insurance premiums.
One of the most significant factors that insurance companies use to determine your insurance rates is your age. Why? Because, in many cases, your age directly correlates to how risky it is for them to insure you and your vehicle. Typically, young drivers cost the most to insure. This is because they lack experience behind the wheel and life experience that helps them make quick and wise decisions. Statistics show that teen drivers file more claims than middle-aged drivers, and therefore, insurance companies charge more for young drivers to counteract the loss of profit.
Conversely, middle-aged drivers have years of experience behind the wheel and life experience to navigate challenging situations on the road and therefore prove to be less risky to insure, so their insurance premiums reflect this lower risk with lower premiums as well. Though, once you reach a certain age threshold (usually around 70 years old), insurance premiums will begin to increase again because those with advanced ages may begin to show decreased cognitive abilities and reaction times, thus causing them to be riskier to insure yet again.
Though age is a significant factor in how your insurance rates are calculated, it is one factor where you, as the driver, have no control or ability to change it. Therefore, it is an area where you are simply at the mercy of the insurance company.
Like the statistics that show age correlates to an increase or decrease in car accidents, statistics also who that gender plays a factor in whether you are a high or low risk to insure. Studies find that male drivers have a higher likelihood of taking significant risks while driving and therefore have a higher risk of filing a claim that contains a considerable amount of damage. This is especially true for young or teenage drivers. Therefore, insurance companies tend to charge an average of $300 more per year for young male drivers than for female drivers of the same age.
Though, as age increases, this distinction decreases. Adult male drivers do not file significantly more claims than adult female drivers, so the premiums for each are typically in a similar range.
Did you know that the vehicle you drive directly impacts how much you pay for car insurance? That little red sports car is exciting to drive, but you will also pay a higher rate to drive it. Car insurance companies do not harbor grudges against fancy cars; it is simply a matter of mathematics. If a vehicle costs more to repair, then it costs more to insure. The opposite is also true; less expensive cars will also be less expensive to insure.
How well the vehicle performs in crash tests, the likelihood of the car getting stolen, the reliability of parts, and the features such as anti-theft devices also play significant roles in how expensive your vehicle may be to insure.
Where you park your car and where you do the majority of your driving may affect your insurance rates. Insurance companies keep records of the risk of insuring a vehicle in every zip code. If you live in a highly populated area with highways, intersections, and many vehicles on the road, then the chance that you may get into a car accident is higher than if you live in a rural and less populated area.
Similarly, if you work from home or only travel within a radius of a few miles each day, you are statistically less likely to receive car damage than if you have an hour-long commute or do a lot of traveling for work. If your yearly mileage is low, make sure to mention this to your insurance company to see if you can receive a discount on your rate.
The type of coverage you carry dramatically affects the rates you pay. For example, if you only carry liability insurance, then your insurance company will only have to pay for damage to other cars that you cause. But, if you carry liability, collision, comprehensive, roadside assistance, car replacement, personal injury protection, and any other coverages your company offers, then the likelihood of your company having a large payout is quite high.
Similarly, the deductible you choose impacts your premium as well. If you have a higher deductible, then you may have to pay more out of pocket per incident, but you will pay less per month. If you have a low deductible, then you may see higher charges per month to make up for it.
This factor is the area where you have the most control over your premium costs. You can increase or decrease coverage choices depending on how much you want to pay for your monthly premium.
The second highest area where you have the most control over your premium is when it comes to your credit score and driving record. If you have a high or decent credit score, insurance companies are inclined to believe that you will pay your premiums on time. Similarly, those with a clean driving record typically cost less to insure than those with a peppered record and history of insurance payouts.
You may not be able to control your past history of driving incidents or defaults on credit, but you can make changes to your record going forward. Many companies have programs you can participate in to earn safe driving certificates that may lower your costs. Also, if your credit score increases, you can ask your insurance company to complete a review of your case, which may result in lowered rates.
Finding Insurance Quotes
The most pressing factor affecting your insurance rate is the company you select for insurance. Every company has a different method for calculating rates, and one company may be better for you and your circumstances than all the rest. But how do you find that company? You could choose to spend a lot of time on the phone with each company and researching online, or you can let our team at Independent Insurance Brokers Arizona do it for you.
When you work with us, our job is to shop around for insurance quotes from many of the major and local carriers in your area. We know the ins and outs of our carriers and can help guide you to the best company with the lowest rate that meets all of your insurance needs.
Call us today to find the right fit for you.