Car Insurance Rate Factors

Car Insurance Rate Factors

If you are like most people, you are probably trying to find a better deal on auto insurance but are overwhelmed with all of the choices. Rates have been going up the past year, and national average rates now hover around $120 per month. Most people don't know how car insurance rate factors affect how much you pay for coverage. Understanding these factors is the key to getting lower insurance rates.

First, let's go over some auto insurance basics. You need to familiarize yourself with the industry terms to make more informed decisions. Auto insurance is important because almost all adults have a vehicle and need to get it properly insured at the lowest possible rates. It is often the 4th or 5th most expensive monthly bill for most households. The good news is you can save hundreds per year if you do some research and compare multiple quotes. Let's go over some basic terminology.

Insurance Lingo Made Easy

Premiums: This is the price you pay for your auto insurance policy. For example, you might be quoted $1,200 for twelve months of coverage or $625 for 6 months of coverage. If you decide on an installment plan, your monthly premium for a 12-month policy is $100, and about $104 for the 6-month policy. It's important to point out that most insurers offer lower rates for twelve-month policies. If you want the cheapest possible premium, pay for a 12-month policy in full and upfront.

Liability, Collision, and Comprehensive Coverage: These are the three basic types of coverage. Liability is the cheapest coverage you can get because it is limited in what it covers. Many people often opt for state minimum-only car insurance, with 1 dollar a day car insurance under certain conditions. Collision and comprehensive insurance offer greater and broader protection, although it's more expensive. Collision will add protection to your vehicle after a wreck. Comprehensive insurance will cover almost anything that damages your car, other than an accident with another vehicle.

Coverage Limits: This is just the total or maximum amount your insurer will pay you. If you are at fault in an accident and the claim exceeds these limits, you will be under a legal obligation to pay the difference. This is why it's so important to get the maximum amount of limit protection to fully protect your assets.

Factors that Affect Premiums

  1. The age and sex of the driver. Yes, men do pay a bit more for auto insurance coverage, but recent congressional bills aim to stop that legal discrimination. The motorist's age is one of the biggest factors affecting premiums. Drivers under the age of 25 pay the highest rates of any age group and, as you might expect, get into more accidents. They also engage in super risky behavior like driving while texting.
  2. The vehicle you drive. This is a huge factor that insurers use to set rates. In general, the newer and more luxurious the vehicle is, the higher the premiums will be. On the contrary, boring old family cars that are also safe have some of the lowest rates. This includes old family sedans and mini-vans.
  3. Your Zip Code.  Ever wonder why the first thing you enter when applying for auto insurance quotes is your zip code? This is because each insurer has extensive data on every zip code in the country. This includes information such as accident rates and auto thefts. For example, two friends of a similar age and driving record could live in the same area but pay rates that vary by 20% more just because they live in different zip codes.
  4. Your Credit Score. If you have great credit, you can save big on insurance. If you don't, then expect to pay higher rates. Credit is a key component that insurers use to predict a person's risk profile. If you have a credit score below 650, get it up and watch your premiums go down.
  5. The Deductible Amount. One of the best ways to save on coverage is to select a higher deductible, often $1,000 or more. This will lower your rates by 15% or more. You just need to stay disciplined and have the money saved in case you ever get into a crash and need to file an accident claim.
  6. Driving History. The more at-fault accidents you have on your record, the more you will pay to get covered. This also applies to tickets. Most companies will take a three-year look at your driving record and use this info as a factor in setting the premiums you pay.
  7. Coverage Lapses. If you cancel your auto insurance for a period of time, this is known as a lapse of coverage. It signals to insurers that you might have financial problems or are a poor customer who frequently cancels their insurance. To get lower rates, keep continuous coverage.

Shop for Direct Car Insurance Online and Save

The web is the go-to place for auto insurance shopping these days. Why call an agent when you can compare Unique auto insurance quotes in less than 5 minutes and save hundreds simultaneously? Direct providers can help you lower your insurance premiums and put more money in your pocket. Just enter your zip code and apply for a free online rate quote to start saving.