Like the Bermuda Triangle, the Sphinx, and the island of Atlantis, the way that car insurance rates are calculated is one of life's great mysteries. There are many factors that go into determining your individual rate, including the type of coverage you choose and your desired deductible, but there are also other variables—some that may be beyond your control—that influence your premium rates. You've most likely been paying for car insurance for years, and perhaps you've never put much thought into how your carrier arrived at your specific rate, so today, we'll dive into some of the variables.
Who would you trust driving you to work in the morning at the peak of rush hour: a newly licensed 16-year old or an experienced 35 year-old? Chances are, you'd likely jump in the car with the older, more experienced driver before the rookie teenager, right? Well, when it comes to car insurance rates, carriers make risk assumptions based on a driver's age and driving experience. From a statistical standpoint, the less you've driven over your lifetime, the more likely you are to cause an accident. In fact, according to the Center for Disease Control and Prevention, 16-19-year-old drivers pose the highest risk for automobile accidents than any other age group.
Right or not, gender can also be a determining factor in your car insurance rate, with men typically paying more than their female counterparts, all things being equal. While it may seem that carriers are making sweeping generalizations about the driving habits of men vs. women, they are basing their assumptions on facts. According to the U.S. Department of Transportation, the percentage of drivers involved in crashes where speeding was a factor is always higher for men than women, in all age groups.
Drivers who live in cities and towns with a higher concentration of traffic or higher rates of theft pay higher insurance premiums. Carriers view heavy traffic, congestion, and high rates of auto theft as risk, and higher risk translates to higher premiums.
You might also be interested in: 5 Ways to Reduce Your Auto Insurance Rates.
Again, it may seem "unfair" to use marital status as a factor in the insurance premium algorithm, but carriers view married couples as less risky drivers than their single counterparts, and reward them with lower car insurance premiums—around 10% less on average, according to CarInsurance.com. Their theory is that married people tend to be more responsible and mature; therefore, they are more careful drivers than singles.
Car Make and Model
Some vehicles are safer than others, and carriers will reward its drivers with lower insurance premiums. Likewise, more expensive vehicles, and vehicles that have a higher rate of theft will cost you more to insure. For example, all things being equal, a minivan will most likely cost less to insure than a red convertible sports car that is more tempting to speed in and more attractive to car thieves.
Your driving record has the biggest impact to your insurance rate. Insurance carriers base your rate on the likelihood that you will be involved in an accident, and if you have a record that is riddled with speeding tickets and fender benders, your insurance rate is going to reflect a higher level of risk. Obviously, accidents are not completely unavoidable, but doing your best to abide by all traffic laws and maintain a clean driving record is your best bet for keeping your auto insurance premiums as low as possible.
While auto insurance is unavoidable if you own and drive a vehicle, the amount you pay for your premiums is somewhat up to you. Shop around and review all of your options to make sure you're getting the best rate for your situation.