Factors That Drive Your Car Insurance Rate

Car insurance often feels like a love-hate relationship. While you love that you, your family, and your vehicle are protected, no one enjoys paying costly insurance premiums. If your goal is to lower your policy price, it helps to understand how insurance companies determine your rate. 

Whether you’re a young or seasoned driver living in a rural area or a major metropolis, these aspects all affect your rate. Insurance providers use advanced algorithms based on vast amounts of data to determine your premium cost. You could spend a lifetime studying insurance policies and pricing; however, we’re here to help identify significant factors that determine the rate you’ll pay.

Age 

Your age is a primary factor affecting your car insurance cost. Developing skills and awareness to become a safe and alert driver takes years of experience. That’s why young drivers will see a higher premium on their car insurance bill (or their parents will)! You are typically considered a young driver until you reach age 25, at which point you may start to see your premium drop. 

Gender

Believe it or not, your gender really can impact the cost of your car insurance. Studies show that men tend to engage in riskier behaviors more frequently than women, which includes activities like speeding, racing, showing off, and reckless driving. 

While gender does play a role, age tends to correct this aspect. If you are a male with a safe driving record of several years, your gender will typically play a minimal role. The older you become, gender will have less of an impact on your premiums (unless you have speeding or reckless driving tickets).

Marital Status 

Some providers may view married drivers as more stable and thus less of a risk to insure. Being married may also qualify you for additional discounts, especially if you are able to bundle vehicles with your spouse. 

The downside of being insured as a married person is that insurance companies will consider both spouses’ driving records when building out your bill. Suppose your partner has received multiple violations or been involved in numerous accidents. In that case, you may see a higher premium reflected on your bill once you get married and add them to your insurance. 

Location 

Those who live in more densely populated areas like big cities will have a higher insurance payment than those living in more rural areas. Your location significantly impacts your premium because the more drivers there are on the roads, the higher the risk of accidents. 

Location can also be used to estimate the number of uninsured motorists on the roads, the frequency of accidents, crime, etc. The closer you live to metro areas, the higher your premium will likely be.

Driving History 

Your premium will be lower than many other drivers if you have a nearly spotless driving record. Most insurers will raise your rate after receiving a speeding ticket and will continue to raise your rate if you rack up additional traffic violations. Being involved in an accident can also result in a significant increase in your insurance payment. 

Driving history goes hand-in-hand with age. Every year, more data is collected on your driving history. The longer you go without traffic violations, the lower your premium will generally become. 

Credit Score 

Your credit score is yet another factor that can impact your insurance. If you have poor credit, you’ll likely have a higher car loan rate and higher insurance to match. On the other hand, if you have outstanding credit, you’ll have lower rates on your loan and insurance, so you’ll enjoy lower payments. 

Many insurers predict that those with higher credit scores are more responsible, file fewer claims, and tend to be safer drivers. It’s important to note that some states limit the use of credit scores in insurance premium pricing. Get tips on how to repair your credit in our “Repairing Credit” coach session. 

Occupation 

If you have a hazardous occupation involving driving a vehicle or other machinery, you will likely see a higher rate on your insurance payments due to increased risk. However, if this riskier behavior is solely for work, your employer will likely have their own insurance policy for employees. 

Other occupations may also result in a rise in your rate due to risk, including high-stress jobs and those that see a lot of overtime. Working the late shift or overnight can lead to sleep deprivation, which makes you a more significant risk behind the wheel. 

Safety & Driving Features

Many insurance providers offer a discount program to reward safe drivers and promote better driving habits. If you maintain positive driving habits on the road, you may enjoy significant savings that help lower your monthly insurance bill. 

Likewise, insurers typically offer discounts on your premium for added safety features on your vehicle(s). These could include daytime running lights, airbags, theft-deterrent systems, etc. When applying for insurance, look up all the safety features applied to your car to maximize your discounts.

Grades & GPA 

Many insurance companies offer discounts of up to 25% off for students who maintain good grades. While these discounts will vary by insurer, students must typically be enrolled in high school or college, between the age of 16 and 25, and maintain at least a 3.0 GPA. 

Knowing the different factors that can affect your car insurance costs is essential to understanding your monthly bill and why you may see changes to your rate. Armed with this knowledge, you can go forward and make decisions that align with your unique circumstances and ensure your insurance coverage works for you. 

We’re proud to offer exclusive discounts and credit union pricing on select insurance products for our members. If you’d like more information on our insurance offers, please make an appointment so our team can assist you in finding the right plan for you. 

If you’d like to learn more about our auto loans, we’re ready to help. Please stop by any branch location or call 248-322-9800 extension 5 to speak with a team member today.

 

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