10 Factors Affecting your Insurance Rates
So you found the car of your dreams and need insurance. Or maybe you just love old Bessie and want to see if you can lower your insurance rates, that always seem to rise. You pick up the phone and call around to see what deals you can find, so you can buy that crazy new fangled gadget with your savings. The agent runs your information and tells you how much your policy is going to cost. After someone picks you up off the floor, you think to yourself, “How in the world is my insurance rate that high? I can't pay that much! Is that person crazy?”
While that person may indeed be crazy, those rates are real. Insurance companies take many factors into consideration when figuring out how much you'll pay for insurance. These factors haven't always been explained clearly to consumers, but have no fear! I'm here to break down the top ten factors that may be keeping your insurance rates high.
1) Low Liability/Coverage Limits
How low can you go? Maybe too low when it comes to your insurance liability limits. Liability limits are the maximum amount which an insurance company agrees to pay as a result of a single accident or injury to a single person. Often times this is defined in three numbers, for example 20/40/10. This means if you are rocking out to tunes in the car and rear end five people in the BMW in front of you causing them all whiplash, and totaling the BMW, the insurance will payout $20,000 only per person and even worse, only $40,000 for the entire incident for injuries. What's happens if it costs more than $20,000 for personal injury liability you ask? Sorry to say, you are on the hook for the balance of that bill. Oh and the BMW that was totaled? Hopefully it wont cost more than $10,000 to fix!!!
Contrary to common sense, you will pay more for insurance in the long run for carrying lower liability limits. Why? Because insurance companies see low limits as not being responsible and many don't want to insure you at all taking good and affordable companies out of possibility for you. As you will you see through out this article, responsibility is definitely a real thing! In many instances it may be cheaper to carry the higher limits, which in the long run will help you save on insurance because insurance companies will consider you more responsible. The word of the day might be - responsibility!
2) Zip Code
So, your friend Jerry who lives in the next town over got an amazing car insurance rate. He's super excited so you decide to call and see what kind of deal you can get since your driving records and age are the same. You find out that amazing deal you thought you were going to get isn't going to happen. What the heck, right? The town you live in helps determine how high or low your rate is. The more populated the area, the more likely you are to make a claim, or get into an accident or have your car stolen. Premiums reflect this, which is why you will see a significant change if you were to insure your vehicle in a city. Get multiple quotes and keep reading so you can influence the factors directly under your control.
3) Type of Vehicle
The type of vehicle you purchase will definitely effect your insurance rate. Buying a brand new sports car with all the bells and whistles and setting your sites on being in the next Fast and Furious movie is going to up your insurance premium. Why? Because if you lose the race to Vin Diesel by crashing, it's going to cost a lot more to replace your brand new beauty. The older the car, the less the replacement value and less money for the insurance companies to shell out if something happens to it. This equals lower insurance rates on older and/or safer cars.
A lot of milestones happen between the ages of 16-25. You get your driver's license, graduate high school, turn 21 (party!), graduate from college and get your first job. You're young and excited about the world. Statistically teens and young adults have some of the highest crash rate of any age group. That young and excited phase comes at a cost and that's higher insurance rates.
The best rates are going to be from the ages of 35-75, or as I like to call it the settled down and responsible phase. Don't get me wrong we're still young and full of excitement! Once you hit 75 and up, well your insurance rates are going to go up as well! This is all based on statistics and actuaries. Different insurance carriers will have varying rates for all age groups, so again get multiple quotes and control the factors you can.
Have you ever answered the question “How's your credit?” with “Ummm... I don't know. Sketchy.” If you have, then your insurance rates probably reflect it. Your credit history can have a large impact on your insurance rates with some insurance carriers, but not all. Some companies figure that if your credit is good, that you are a responsible (there's that responsible word again) individual that won't be likely to file many claims. If your score is high enough, some companies may even forgive issues on your driving record or might not even look at your record at all. If your credit is too low, some companies will not offer you a reasonable rate even if there aren't any accidents or violations on your record. Credit can be a big factor and in your control so check your credit score and clean up any issues you may have. It may take some time but your insurance rates may depend on it!
Paying all that money to get a degree pays off in more than one way. There are discounts for having some college education (Associates Degrees, Bachelor, and so on) regardless of age. That's right! Get yourself out there and get some smarts! As you glide across the stage to pick up your degree, your future looks bright and so do your car insurance rates.
Paying a boat load of money for your child to go away to college? Good news mom and dad! You can receive a discount for that, too. Good student discounts typically apply for 3.0 GPAs or higher and will apply to students that are up to 25 years old that are on your car insurance. Any little bit helps when making those tuition payments, right?
7) Marital Status
Most companies will give a discount for being married. Why? Well, statistically couples that are married tend to be more responsible (are you seeing a trend yet) than non-married couples. If you are separated or divorced be sure to let your insurance agent know when they ask about your marital status. You may still fall under the responsible rule above and some insurance carriers will still provide you the same or similar discounts.
8) Deductible Amount
Insurance companies reward customers who are willing to shoulder more of the responsibility when it comes to paying for accidents. The higher your deductible, the amount your willing to shell out case of an accident, the less your insurance rate will be. Why? Simply put, the insurance companies will be on the hook for less money and they love that. And they love you for being the big “R” word – responsible. If you can afford to have a higher deductible, you will save more money in the long run. So weigh your options and start putting some extra money back in your pocket.
9) Prior Insurance / Lapse in Coverage
Your prior insurance has a significant effect when looking for a new policy. Drivers who carry lower liability rates can certainly be penalized. However the big whammy is having no previous insurance or having a lapse in coverage. That's a, for sure, one way ticket to higher premiums. You may not have insurance being a first time driver/car owner or maybe you had a car but got rid of it and have been car free for a year. Once you're ready for insurance, be prepared for higher rates. Generally you'll pay higher rates for the first six months and if you work with a good agency they will re-shop you to help you start dropping those rates.
What about people who have seasonal cars or multiple cars? If you think ditching insurance on your vehicle because it's being garaged for the winter will save you money, think again. You would be better off keeping your comprehensive insurance coverage, even if you aren't driving that car for 6 months. Drop your collision, drop the liability, basically anything that isn't needed for those months. You will actually save more money in the long run keeping insurance for the months while you and your car are taking a little break.
10) Accidents / Violations
Accidents, tickets and speeding, oh my! All of those issues factor into your increased insurance rate. The more incidents you have on your record, the more insurance companies get the heebie jebbies about insuring you and will let you know by sending your rate through the roof. What are the biggest offenders when it comes to incidents on your record? Reckless driving is a big no-no, driving with a suspended license, and of course the mother of all no-no's – the DUI just to name just a few. All these things equal insurance rates from hell.
So what do you do about it? First off, drive like there is always a cop behind you. No, seriously! The better a driver you are, the better driving record you have, the more insurance companies will reward you for this. Secondly, if you have an issue on your record already, you will need to patiently wait until it drops from your record. Major violations take 5 years and minor violations take 3 years. I know it's like watching paint dry but it will pay off in the end as long as no other violations pop in the mean time. While you're waiting for these issues to fade away, be a cautious driver and control the factors you can.
Now you know the 10 major factors potentially keeping your insurance rates high. Now you can take responsibility and control! If you need help and would like a quote, we can help! We treat our customers like family and offer insurance counseling to our customers to help them break the cycle of high insurance rates. It takes some time and discipline but the payoff is big, we have many success stories to share.