Many factors affect the premium you will pay for auto insurance.
Each is a statistically based risk for a specific population. The higher the risk associated with a person, the more he or she is likely to pay for coverage. We have elaborated on some of the risk factors below, but there are numerous others, including driver's gender, miles driven per year, purpose for using the vehicle (commuting to work, using for work, leisure only), etc.
- Age: Statistically, drivers under the age of 25 are at greater risk of being in an accident than those over age 25. Drivers between the ages of 50 and 65 generally have the safest records.
- Gender: Women are statistically safer drivers, but that trend is changing as more female drivers get on the road.
- Marital Status: A married person will pay less than a single person with an identical driving record. They are seen as more stable and less likely to file a clailm.
You can think about these factors and determine what you can do to change them in your situation. You may be able to save on insurance based upon these decisions:
- Geography: Where you live makes a big difference -- in some cases, it's the single biggest factor in determining your rates. Folks living in areas with little or no traffic are likely to spend less on insurance than those living in congested cities or suburbs because areas with a lot of traffic tend to see more accidents. Some neighborhoods also have a higher rate of vehicle thefts, which can result in a higher premium. (See how your state car insurance rates compare.)
- Driving Violations: Having an accident or moving violations on your record (speeding tickets, DWI, reckless driving, etc.) put you at a higher risk for accidents and will likely mean a higher premium. Some insurance companies will penalize you for your record for as many as five years from when the incident occurred. However, keep in mind, as your record improves, your premium will get lower.
- Vehicle Type: A cheap car will cost less to insure than that status symbol SUV sitting on 24" rims.
- Accident Claims: A driving record that is clean and free of accidents will hold far better for you than lots of tickets and/or accidents.
- Credit Rating: Many insurance companies view having a poor, or even no credit history as suggestive of higher risk and thus, charge you a higher premium. Monitor your credit rating free to see if you can get a better score. A better credit score will save on insurance premiums.
- Occupation: Insurers have statistically found a correlation between your occupation and risk. For instance, a newspaper delivery person is most likely a higher risk than the personal banker sitting at their desk all day.
- Education: A higher education can save on your premiums.
- Driving distance to work
- Miles driven each year
- Years of driving experience
- Business use of the vehicle
- Whether or not you currently have auto insurance and how high are your limits
- Theft protection devices (often results in discounts)
- Multiple cars and drivers (another opportunity for discounts)
What can you do right now to make sure you have the lowest premium? Here are the three big ones:
Change your policy by raising your deductibles, excluding a problem driver or by dropping comp and collision.
Change your car. If you're shopping for a new one, take the time to compare rates before you buy. The difference can be hundreds of dollars a year.
Change your insurance company. The difference between companies can be huge -- sometimes thousands of dollars but almost always hundreds -- for identical coverage. The single biggest whack you can take at your rates is simply to shop around.