Several factors can affect your car insurance costs. Ultimately, it comes down to how likely you are to file a claim or cause an accident that results in liability. The higher risk you are, the higher your premiums are likely to be. While all insurers use different formulas for calculating risk, most consider the same types of basic factors in their assessments. Some things, such as your driving record, might seem like logical indicators of risk. Others, such as your credit score, might be more surprising. Continue reading to learn how insurers calculate costs and what you can do to keep your premiums under control.
Factors that Affect Insurance Costs
Your Car – Insurers want to know all of the details about your vehicle, including its year, make, model, and any special trims or factory upgrades it may have. These types of features help determine how much your vehicle is worth and how much it would cost the insurance company to replace or repair it. You will also be asked about the safety features of your vehicle. Certain ones – specifically airbags and car alarms – can help prevent accident-related fatalities and also deter theft, which ultimately saves the insurance company money on claims.
Personal Risk Factors – Some of the biggest factors in determining your insurance costs are personal. Driving record and claims history, for example, are important factors in costs. If you have a recent history of claims or even a couple of speeding tickets, you could be penalized with higher premiums. Likewise, your location may also be considered. For instance, people who live within a short commute to work may pay less than those who drive long distances. Those who live in rural areas may see higher rates due to an increased risk of deer-related accidents. Also, individuals who live in high-crime rate neighborhoods or who keep their cars parked on the road instead of in a garage may also see a difference in premiums.
Your age and the age of other drivers insured under your policy can also play an important role since young drivers. Teen drivers ages 16 – 19 are nearly three times more likely to be involved in a crash than drivers over age 20. Older, more experienced drivers, on the other hand, are much less likely to be involved in a collision. In fact, drivers ages 50-70 may even be rewarded with additional discounts, especially if they begin to put fewer miles on their vehicles after retirement.
One of the most important aspects insurers may consider is your economic standing. It is not just your income, but more specifically how you manage your money that matters. If you have a poor credit history, it could be perceived as a higher risk of filing a claim. Even if you have never had a car accident, you could be charged higher rates simply for having a low credit score.
Keeping Rates Affordable
You cannot change the past, so many of the risk factors on your insurance file can take years to correct. While you wait for old claims and bad credit choices to disappear, there are steps you can take to keep your car insurance costs under control now and in the future:
- Avoid late payments or delinquencies on financial accounts
- Avoid high debt-to-credit-limit ratios
- Practice defensive driving habits
- Avoid filing collision or comprehensive claims for minor damages you could easily pay for out of pocket
The most important thing you can do to control costs: Talk to an Independent Agent
If you are no using an independent agent for your car insurance needs, you could be missing out on a great cost-saving tool. Our team here at Frydach Insurance can shop around for competing rates on car insurance from multiple companies until we find the one that is right for you. We can also dig to find you every possible discount, such as those that offer lower rates for straight-A students, enrollment in a driver safety course, or insuring more than one vehicle on the same policy.