The cost of auto insurance can vary greatly from each individual, even between those with similar driving histories or personal details (like age). There are many different factors that are considered when insurance companies calculate your monthly auto insurance premium. Here are some of those factors that are considered:
- The type of vehicle you own and how you plan to use it: Personal vs business use will affect your monthly premium. How often and how far you plan to drive each week can lead to high premiums because the more you are on the road, the high the chance is that you could be in an accident. A vehicle with higher safety ratings or with anti-theft devices make it less of a risk and can result in lower premiums. Also, certain models of vehicles may correlate with increased theft or tickets, making your premium go up if you own that type of vehicle.
- Your driving history: If you have ever been in an accident or had a speeding ticket, you will be viewed as a higher risk and can have higher insurance rates compared to someone of similar age or with a similar vehicle. Many insurance companies offer a “safe driver” discount because drivers without accidents or infractions are considered to be a lower insurance risk and therefore get lower rates. Those with no driving history (new drivers) can also be viewed as a higher risk because of their inexperience. Luckily, as you age and gain experience, your rates could potentially drop if you prove yourself to be a “safe driver”.
- Your age, marital status, and gender: Insurance companies may seem biased but their reasoning is backed by research. Studies show that married couples are actually less likely to be involved in an auto accident as are females and individuals over the age of 25. These groups are more likely to have lower insurance rates, than the young new drivers, single individuals and men.
- Where you live: The location where you park your car can either increase or decrease your rates. This is because high populated areas are busier and have more accidents. 52% of drivers are in an accident within 5 miles of their home. Those living in a complex with shared parking (like an apartment or townhome complex) may experience high rates than those who own their own home because of the parking arrangement. Those in a complex are at higher risk of hitting another car or having someone hit it even while parked. Those who own their home could receive an additional discount if they carry homeowner’s insurance with the company who provides their auto insurance.
- You credit history: Studies have shown that there is a correlation between individuals with a higher credit score and fewer insurance claims