King Midas never turned anything to gold, and just because you’re getting older doesn’t mean your auto insurance rates will decrease. Many similar insurance myths exist today. But the truth is lots of factors drive auto insurance costs, not just a few. Some insurance companies scrutinize more than a hundred data points on each client and weight them before providing a price. The good news is many of these factors are within your control. Knowing how auto insurance is rated can help ensure you don’t overpay for coverage.
Liability
The largest influence upon insurance cost is liability: the chance that a particular driver using a particular vehicle will result in an accident. So, although much attention may be paid to the criteria explained below, liability covers them all. It explains why a young person driving a worn-out minivan may pay more for auto insurance than a fifty-year-old in a new muscle car. The young person, despite the low-risk vehicle, still presents a higher risk to the insurance company. Whatever the factor, insurance costs increase when liability increases and fall when liability decreases.
Vehicle Age
A newer vehicle will generally cost more to insure than an older one because repairs are more costly. However, that is not always the case. Some older cars can be rated higher than new models due to a lack of safety features. Also, parts for certain older vehicles can be quite expensive, increasing the cost of collision coverage. Whatever the age, the most reasonable insurance pricing can be found for popular base-model vehicles with low-cost replacement parts.
Vehicle Type
A newer pickup truck can be less expensive to insure than an older sports car because, even though the pickup may be more expensive to repair, sports cars are involved in more accidents. Moderately-powered utilitarian vehicles such as pickups, vans, and sedans will prove a better insurance value. Fast, rare, exotic, or antique vehicles will be the most expensive to protect.
Driver Age
Older drivers have more accidents. This is a statistical fact. Sorry, but we cannot change the math. Yes, younger drivers have high accident rates as well. But if one looks strictly at age without the influence of any other factors, the frequency of accidents is high toward the beginning and end of our driving careers. Auto insurance rates reflect this, so they are high for new drivers and decrease as experience builds, up until around twenty-six years old. Then we all enjoy a reprieve until they start to climb again after sixty-five or seventy. Eventually, they may even surpass those paid in our youth.
Grades
Students with good grades present lower liability, and many insurance companies have good grade discounts which can mean big savings.
Driver History
Driver infractions can send rates skyward. Driving history is linked to future claims, therefore insurance companies use past driving history to determine insurance rates. The severity of the affect will vary by the type of infraction. For example, a simple moving violation will have less impact on insurance rates than a DUI.
All Drivers in The Home
Insurance companies include ALL drivers in the home when rating for auto insurance. This is because all drivers in the home have access to the vehicles. Often clients will say, “But I don’t let them drive my vehicle” about a relative living with them. This may be true, but the relative still has access to the car and, in a pinch, can end up driving it. Insurance companies are often surprised by claims involving drivers who were supposedly not able to operate the vehicle. This means that when your mother-in-law moves back into your house, it could affect your insurance rates. The best way to avoid this situation is for the other driver to obtain their own separate insurance policy.
Insurance Score and Credit Score
Many insurance companies utilize credit as an input to generate an individual’s insurance score. The better the insurance score, the lower the risk to the insurance company and therefore the lower the price of insurance. But what’s the difference between a credit score and an insurance score? Credit is an input to insurance score. The opens in a new windowNAIC lists the major factors of an insurance score as:
Payment history (40%) is how well payments are made on outstanding debt.
Outstanding debt (30%) is the amount of debt currently owed.
Credit history length (15%) is how long a line of credit has been in place.
Pursuit of new credit (10%) is for applications for new lines of credit recently made.
Credit mix (5%) is the types of credit held (credit card, mortgage, auto loans, etc.).
Certain states limit or prohibit credit as a factor in rating insurance.
State
Court systems vary, and insurance is governed by each state. Thus, if a state has a history of being difficult in which to do business and the courts routinely hand out high settlements against insurance companies, the cost of insurance in that state will reflect it. Louisiana, Florida, Michigan, New York, and Nevada are expensive auto insurance states. 1
Garaging Location
Simply moving across town can affect auto insurance rates. Certain areas of town may experience higher accident or theft rates, leading to an increase in the likelihood of a claim.
Storage
Even where a car is stored makes a difference. If parked in a locked garaged, that is best. A private driveway is good as well. But higher rates are given for parking lots, decks, public parking, and street parking.
Uninsured Drivers
Areas with more uninsured drivers mean higher premiums. If in an accident and the offending driver is not insured, your own insurance pays to repair your vehicle (depending upon your coverage selection). Did you realize opens in a new windowone in eight drivers on U.S. roads are uninsured? In Mississippi, that figure is almost one in every three. In this way, the number of uninsured drivers in an area affects insurance rates for all.
Gender, level of education, and many other factors can affect auto insurance rates as well. But if the unfortunate occurs and you have an accident, remember that is why you have insurance and report your claim. Bankers Insurance has hundreds of insurance companies to shop your coverage, most not available directly to the public.
Questions on car insurance? Contact your Bankers Insurance agent. We will help determine your risks and advise how to cover them. Not a client of ours? Let us earn your business! Each of our clients is assigned a personal insurance agent and provided their email address as well as a phone number that rings right on their desk.
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