Ari Rush
Auto insurance can be confusing. Most Companies claim that they can offer you a better rate than the competition – but what really goes into calculating the cost of car insurance?
There are a number of factors that go into determining the cost of your insurance. These factors are weighed differently by various providers and the information can be overwhelming. To help make sense of the prices, here is an overview of the considerations that make up the cost of your auto insurance.
1. Gender, Age, and Marital Status
Drivers under 25 have higher crash rates across all genders. Crash rates are especially high among single males who are under 25, and insurance prices in most areas will reflect this difference. As you age, your insurance rates will likely decrease, as long as you remain accident-free – but if you’re under 25, you can expect to shell out a bit more for your monthly coverage.
Interestingly, marriage can have a significant effect on your insurance rates. Married couples are less likely to be involved in car accidents across the board, which can result in a lower cost for insurance premiums
2. Your Location
Location is another key factor in determining the cost of your auto insurance. When considering your location, insurance companies look at the following:
- Accident rates on roadways
- Theft rates
- Incidences of vandalism/property destruction
- Traffic density
Combined, these factors have a large impact on the cost of your insurance premiums. As a rule, urban drivers will pay more for insurance than rural drivers. This is because cities have denser traffic, higher theft and vandalism rates, and higher rates of auto accidents.
3. Your Driving Record
If you’ve been involved in a crash within the last several years, you’ll usually pay more than an individual who is accident-free.
However, if the incident was ruled not to be your fault, you may not experience a rate bump, though this depends on your insurer and the specifics of the incident.
If you are found at fault, your rates could jump up, depending on your degree of responsibility. Over time, however, maintaining a safe driving record will allow you to reduce your premiums. So even if you do have a crash on your record, drive defensively – and do your best to avoid being involved in accidents. Eventually, you’ll be able to lower your rate.
4. The Type Of Car You Drive
What you choose to drive can make a difference in your premiums. The following are things that your insurer may consider when calculating your rate:
- Value of your vehicle – Naturally, a car that is worth $40,000 will cost more to insure than a car that’s worth $10,000, because your insurance company is on the hook for the cost of replacing the vehicle in case it’s totalled. More expensive vehicles will be more expensive to insure, and vice-versa.
- Safety ratings – Cars with higher safety ratings usually command a lower auto insurance rate. These safety features can include side airbags, automatic seat belts, ABS brakes, and crumple zones, which helps to lower the risk of injury.
- Size of vehicle – Generally, larger vehicles are considered safer than smaller cars. A large car with a good safety rating will usually be less expensive to insure, compared to a smaller vehicle with the same safety rating.
- Vehicle type – The vehicle type is also considered when insuring a car. For example, a sports car is going to be more expensive to insure than a comparably-priced truck or SUV. This is because sports cars are seen as highly desirable, and are more likely to be stolen.
5. How Often You Drive Your Car
Your personal driving habits tend to have a fairly significant effect on insurance premiums. Simply put, the more you drive, the more likely you are to get in an accident.
If you have a long commute, or regularly use your vehicle to travel long distances, you’re going to have a higher insurance premium than someone who uses their car less frequently.
The more time you spend on the road, the more likely you are to get in an accident. This has a major effect on your auto insurance premiums.
Now that you have a better understanding of some of the factors that can affect how your auto insurance premiums are determined, you can keep these factors in mind the next time you shop and compare auto insurance rates.
