9 Important Factors That Affect Your Auto Insurance Premium

By: HPadmin | April 3, 2019
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Most states require you to have auto insurance if you own or drive a vehicle. Having auto insurance isn’t just mandatory, it helps compensate for expenses related to vehicle damages and injuries brought about by an accident. It also provides financial assistance if your car gets stolen or destroyed by fire or a calamity. When shopping for auto insurance, it is important to be aware of the factors that affect cost and how you can lower your premium.

1. Age

Younger drivers have less experience behind the wheel, and that makes their insurance more expensive compared with their older counterparts. They are also known to be careless, easily distracted and statistically more likely to be involved in crashes. For drivers ages 20 and above, however, insurance companies are less likely to refer to age as a significant factor for rates.

2. Where You Live

Insurance companies also weigh risk factors based on your ZIP code. Urban areas are usually more populated and congested, increasing the risk for vandalism, theft and vehicular accidents. Insurers also check the cases of stolen vehicles and fraudulent claims in your area. The kind of natural calamities that occur in your location and how often they occur can also greatly affect your insurance premium.

On a state level, some states, including Florida and Michigan, have no-fault insurance laws. This means that every driver can file a claim with their insurance company after an accident, no matter who is at fault. No-fault states often require personal injury protection (PIP) insurance, which is a more expensive type of insurance due to its comprehensive coverage.

3. Type of Vehicle

The newer and more expensive a vehicle model is, the higher its insurance typically will be. Repair costs for old cars are usually more expensive than the value of the vehicle itself, making the owner more likely to discard it. Insurers also assess the number of reported theft and accident based on your vehicle model. Built-in safety features such as anti-theft features and anti-lock brakes may help lower your auto insurance premium.

4. Driving Record

Your driving record will play a significant role in determining the cost of your auto insurance premium. If you have been in an accident and/or received tickets for road violations (DUI, speeding, etc.), you will most likely have a higher auto insurance rate. A clean driving record would result in a smaller rate and would even qualify you for a discount of up to 30 percent. If you are a new driver and haven’t purchased auto insurance before, it is also more likely you will get a higher rate.

5. Credit Score

Insurers also refer to your credit score when calculating an insurance premium. Based on research, those who have low credit scores file more claims than those with high credit scores. Most of the claims filed by the former are found to be fraudulent and more expensive. Since a low credit score is correlated to missed payments, insurers may ask a higher percentage of the policy or a six months’ or a year’s worth of premiums on the spot before a policy will be issued.

6. Claims History

If you have made any prior claims from your auto insurance provider, it will also affect your rate going forward. A surcharge will be included for at-fault claims but may be waived if the amount is less than $1,500, depending on the insurance company. For not-at-fault collision claims, no surcharge will be added.

Auto insurance providers are also going to check how many claims you’ve made in a period of time to determine whether to increase your rates or reject your policy.

7. Driving Experience

This rating factor is self-explanatory. If you’re a newbie behind the wheel, it’s more likely that you will make mistakes and commit violations than someone who has been driving for years. Teenagers are often at risk for car accidents due to inexperience; therefore, insurance companies charge higher premiums in this age bracket.

8. Annual Mileage

The average time you spend behind the wheel also affects your insurance rate. Insurance companies will check how long your daily commute takes and the places you often travel to for more accurate risk analysis.

9. Profession

This is a fact that a lot of people may not be aware of. Insurance companies also look at the profession of a person to determine their risk of an accident. For example, if your job requires that you stay on the road for a long amount of time, as is the case for a semi-trailer truck driver or a delivery driver, you are more susceptible to a road accident compared to professionals who spend more time behind a desk. People in the medical field and insurance underwriters are often considered for a good rate due to supposedly having a tendency for higher mindfulness.