What impacts your rate?

What factors influence the cost of your car insurance?

There are several misunderstandings concerning auto insurance, particularly around how your cost is determined. The reality is many factors are considered and each insurance company is different so it's important to shop around for the best value. Here are some of the factors used in determining your premium:

Teenagers as drivers

According to the California DMV, teenagers are 2.5 times more likely to be involved in a collision than 20-24-year-olds. When compared to experienced drivers, this type of risk results in considerably higher rates. However, it is not all bad news for young drivers. As a method to offset the expense of insuring new drivers, some companies offer discounts like driver training and good student discounts.

 

Age

Rates typically decline (or steady) as you become older, until you reach the age of 75. But keep in mind that it's not necessarily your actual age, but rather the number of years you've been driving that counts.

 

Use of a vehicle

If you primarily use your car for pleasure or commuting, you will often pay less than a motorist who uses their vehicle for other purposes. Some businesses may charge you extra or even demand a commercial insurance if you use your vehicle for business or ridesharing services like Uber and Lyft.

 

Tickets for speeding and traffic violations

If it's your first speeding ticket in three years, you might not get a penalty increase at all. However, if you receive two or more tickets in a three-year span, you'll almost certainly receive a rate increase at your current insurer and also if you look for another company. The good news is that the increase will not be permanent, as speeding fines usually disappear from your driving record after a few years. Parking fines are inconvenient to pay, but they will never impact your insurance price.

 

Accidents in which one party is at blame

Most at-fault incidents, like speeding citations, will boost your insurance premium, but the rise will be temporary. Accidents in which you were at fault are removed from your record after a few years.

 

Keep in mind that accidents may not necessarily result in a higher insurance rate, many insurers have accident forgiveness.

Accidents in which neither party was at fault and in which just one vehicle was involved

There is no simple solution because it differs per state. In many places, there will be no increase for a not-at-fault collision. However, in other places, your insurance company may raise your rate—so it all depends on your state and your insurance provider. Insurance companies often view one-car accidents to be at fault because there is no other driver involved.

 

Location

One of the most critical elements in predicting the likelihood of an event is your ZIP code. If you reside in a densely populated location, you are more likely to experience car theft, accidents, and damage. Because of these risks, you're likely to pay extra for the comprehensive and collision portions of your vehicle insurance.

Coverage options

In general, the greater the premium, the more coverage you have. Obviously, the state-minimum plan will always be the least costly, while maxing out your coverages will always be the most expensive. The good news is that you may occasionally raise your coverage amounts by thousands of dollars while only seeing a minor adjustment in your premium. Your deductible amount will also have an effect on your rate.

The larger your deductible, the greater the portion of the repair or claim expense you must pay. That implies your out-of-pocket expenses will be higher, but your total rate will be cheaper, and vice versa.

How do you pay?

Most insurers provide various discounts based on how you pay. Some insurance providers offer savings for paying in full, obtaining and signing your papers online, and paperless bill payment. 

 

Mileage

Many insurance companies base their rates on how frequently you drive and may charge high mileage drivers extra. Some insurance companies promote Usage Based Insurance (UBI), which tailors your auto insurance premium depending on your driving patterns.

Credit

Credit (insurance score) is one of several criteria considered by certain insurers (in most states) when determining your rate. In general, a higher credit score equals a lower premium. Also, getting a quote or buying a policy will not have any effect on your credit score, it is considered a "soft hit" which does not impact your score. 

 

Insurance that is ongoing

You'll generally obtain a reduced premium if your insurance history is free of gaps or cancellations (even if you were previously insured by a different company). Some insurance companies provide a discount for an ongoing policy. That is, they will respect the length of time you have been with their company or your prior insurance carrier. The better the discount, the longer you've been with the same firm.

 

Size of the engine

The size of the engine is an important consideration since a large, V-8 engine or more makes it simpler to speed or drive recklessly, which might result in a higher rate.