What Affects Your Car Insurance Rates?

8 Aug

Why do some people pay more for car insurance than others? The bottom line is usually answered by one question: what is the increased likelihood for the insurance company to pay for damages to a vehicle? Obviously if there is a larger risk for the insurance company to lose money, the company will charge higher monthly fees in order to make up for that loss. As a result, the factors which insurance companies use to determine a monthly fee are all directly related to the increased chance of a collision or crash.
Hopefully, armed with this information, you will be able to successfully obtain the car insurance plan and price that is right for you. Now, let’s examine some factors that insurance companies will use in order to determine your monthly fee.

Location
Where you live is highly indicative of the price of your car insurance. Studies have indicated that collisions and accidents are more likely to occur in urban settings rather than rural areas. Therefore, people who live in cities and heavily populated areas tend to pay more for their car insurance. State requirements for car insurance premium minimums can also play a role.

For example, based on percentage of annual household incomes, the following states have the highest car insurance premiums on average:
  1. Michigan
  2. Louisiana
  3. Kentucky
  4. West Virginia
  5. Mississippi
  6. Arkansas
  7. Delaware
  8. New York
  9. Nevada
  10. Florida
 You can always inquire about taking a defensive driving or traffic school course to lower your rates. Some states likeNew York and Delaware provide a mandatory discount.

Age
Younger, inexperienced drivers (typically those between 16 and 24) and older drivers (those aged 74 and above) tend to be charged more for their car insurance than the average driver. Though these two categories of drivers are dissimilar, they share the common trait of being involved in more accidents on average than a driver in their 40s or 50s would be.
Younger drivers often are involved in more collisions due to their inexperience behind the wheel. Though they have fresh reflexes and muscles, this age group has only been on the road for a few years and, as a result, tends to feel overconfident. They are more likely to engage in reckless driving behaviors such as running stop signs or red lights and speeding.
Older drivers, however, are involved in more vehicle violations for the opposite reason: although these drivers are rich in experience, their reflexes and muscles cannot react as quickly as those of younger drivers. Their eyesight and response time dwindles with age. Thus, both of these age groups are targeted for higher insurance rates due to their unfortunate traits.

Gender
Male drivers have a history of being involved in more accidents and collisions than female drivers. This is usually due to factors such as aggressive driving. Regardless of why men are involved in more driving violations, studies performed by insurance companies have recognized this fact and the rates for men and women differ, in part, because of it.

Marital Status
Whether or not a person is married is another factor used by insurance agencies to determine the cost of an insurance plan. Married men tend to be involved in fewer accidents than a similar man who is unmarried. Marriage is a display of responsibility in a person’s life, and if a man or woman is responsible in this aspect, statistics predict that they will be more likely to be responsible in other ways as well (such as driving). As a result, married persons are generally charged less for their car insurance than those persons who are unmarried.

Type of Car
Different makes and models of cars have different insurance rates for a few important reasons. If a car has a high theft rate, either from being a popular car or a luxuriously expensive one, the insurance agency views this as a hazard. If the car is a sports car or one with a powerful engine, the insurance company may see this as a potential hazard as well, because an individual may be tempted to speed or drive recklessly. In either case, the rate of your car insurance will be higher than the average car because of this.

Use of Car
How you use your vehicle directly correlates to your car insurance rate. More specifically, however, the amount of miles you drive your car – either per day or total – has a positive correlative relationship with the price of your insurance. This simply means that the more you drive your vehicle, the higher the price you will pay for insurance.

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