The cost of car insurance
If you drive a car, even if you don’t own your own car, you need to have car insurance. What you pay for car insurance depends on a number of factors, some of which you can control and some of which you can’t. Here are some of the most common factors that affect how much you pay for car insurance.
Your driving record
One of the biggest factors in how much you pay for car insurance is your driving record. Insurance pricing is all about risk, so the more accidents and traffic tickets you have on your driving record, the bigger the risk to insure you. That means that in general, you will pay more for insurance than someone who has fewer tickets and accidents, assuming other factors are the same.
It’s a fact that younger people, especially teens, tend to pay higher car insurance rates than older people. This again goes back to risk. Research shows that young, inexperienced drivers are more likely to get into accidents. Young people also tend to take more risks, such as speeding or driving recklessly.
Women tend to pay lower car insurance with Youi rates than men, especially when they are younger. As with age, this is a function of risk. Young women tend to be more cautious drivers than young men, so they are less of a risk to insure, which leads to lower insurance rates.
The kind of car you drive
There is a misnomer that the bigger and more expensive your car is, the more it costs to insure. Many large SUVs are actually cheaper to insure because they are less likely to sustain major damage in a crash and their occupants are less likely to be injured. You are more likely to pay higher premiums on a smaller car, especially a sports car.
Where you live
The city in which you live can play a role in what you pay for insurance in a few ways. If you live somewhere where hail and tornadoes are common, you will pay more in insurance premiums than if you lived somewhere with less of a weather risk. Your car insurance premiums also may be higher if you live in a city with a high incidence of auto theft. And the specific location of your home also can affect your car insurance rates. If you have to park in an open area or if you commute far for work, you may see higher rates.
The type of insurance you have
The minimum amount of car insurance required is liability insurance, which will pay for damage you cause to property in an accident. Your insurance premium will be much cheaper if you just have liability insurance and will increase incrementally for each type of insurance coverage you add. Collision coverage pays for damage to your vehicle sustained in a crash that’s not covered by other insurance. Comprehensive coverage pays for damage to your car caused by weather, fire, theft and other non-collision causes. Carrying these or other types of coverage will cause your premiums to be higher.
Your deductible level
Your deductible is the amount of money you have to pay out of your own pocket on each claim before your car insurance coverage kicks in. The higher your deductible, the lower your premiums will be because the risk is lower for your insurer. Higher deductibles also typically mean fewer claims overall, which saves insurers money.
Your credit score
A little known factor in not just car insurance but other types of insurance as well is your credit score. Industry research shows that people with higher credit scores are more responsible, which means they are less likely to get speeding tickets or cause accidents. That makes them cheaper to insure. If you have a high credit score — typically in the mid- to high 700s — your car insurance premiums likely will be lower than for a comparable person with a lower score.
These are a few of the main factors that affect the cost of car insurance. Each insurer has different risk models that give more weight to some factors and less weight to others. The key is to understand that not all insurers are the same and that you need to shop around for your insurance to have the best chance to get the lowest-possible rates.