Auto Insurance Mysteries: What Factors Determine the Cost of Insurance?

by Susan Paige on July 23, 2019 · 0 comments

The reason you see those commercials always telling you you’re overpaying for insurance is that the facts have come in and it’s likely you are. In fact, the average American overpays for car insurance by more than $350 a year. That means there are people overpaying by $1 and people who are overpaying by $1,000 or more.

If you’re worried about the cost of insurance, here are the reasons that it can cost so much.

Your Gender and Age Come Into Play

When buying car insurance, you’re up against statistics and unfortunately, young men have higher rates of accidents young women. That means that the cost of your insurance is going to be much higher if you’re buying it as a young man still in high school or college.

However, the situation flips as people get older. Statistics show that older women get in more minor accidents than older men. At an advanced age, women are more likely to pay a higher premium than men, though not as dramatically different as when drivers are young.

Insurance Agents Look At Your Vehicle For Safety

Before agents set a deductible and a cost that you have to pay for insurance, they’re going to consider how safe your vehicle is. If it’s got all of the latest safety features and is brand new, it’s more likely to be up to date with inspections.

An older car or one without the kinds of cameras and sensors that modern cars are outfitted with is going to have more blind spots. Your insurance costs are going to be higher driving a car like this.

When you’re driving a car with a higher safety rating, medical bills for you and your passengers will be lower. Airbags, traction control, and automatic seat belts all come into play.

A Commonly Stolen Car is a Bad Investment

There are some obvious reasons why cars that are commonly stolen are a higher insurance risk than others. No insurance company wants to be responsible for footing the bill on an entire car.

However, a new red sports car isn’t always the main target for theft. There are some cars that historically saw more theft than others. The customizable aspects of the 1996 Honda Civic make it a car that’s still coveted to this day.

Consider Your Driving History

No matter your age, gender, or car that you drive, a bad drive is going to cost insurance companies more than a safe driver. If you’re constantly putting yourself and others at risk, insurance companies might not want to deal with you.

Each time that you receive a ticket, make an insurance company claim or get in an accident, you are given a rating by insurance companies. While some of these expire after a certain period of time, others can mark you indefinitely. Some insurance companies might flat out refuse to offer you insurance based on your history.

If you have a history that’s been making your insurance rates for car insurance go up, don’t fret. After just a few years, these marks won’t be as much of a problem. If you end up with a DUI, that’s the one violation that can cause you problems for up to 10 years.

Location Plays a Part

The fact is that most traffic accidents occur close to your home. The amount of traffic near where you live is going to determine what your rates are. The more cars there are, the more trouble comes along with that.

In densely populated metro areas, you’re going to be at a much higher risk of accidents. You’ll also be dealing with higher rates of theft, more pedestrians, and more potential for collision.

Cities also have higher costs when it comes to a visit to the body shop. Urban areas with high unemployment also carry more uninsured drivers because of people who can’t afford insurance. This makes an accident with someone who is uninsured into a serious headache for insurance companies.

Because of density, tighter streets, uninsured drivers and more, Detroit and Philadelphia happen to be two of the cities where insurance is most expensive. If you can insure your car outside of the city, you’d be well-advised to do so.

Your Finances Determine Your Rate

Your creditworthiness plays a role when it comes to determining what your insurance rate is going to be. Many positive traits are associated with good credit, meaning that people who pay their bills on time are more likely to be careful drivers.

While these things don’t always go together, low scores and high premiums do. If you want to keep your insurance rates low, make sure to keep paying off bills on time and getting rid of debt. When you’ve improved your credit score, call up your insurance company and ask about having your rates reduced or recalculated.

Even the kind of job you have comes into play. There are a few professional roles like delivery drivers and musicians have that require being on the road a lot. People who drive just between work and home every day are going to get in fewer accidents because they’ll drive familiarity

The Cost of Insurance Doesn’t Have to Be So High

If you’re worried about the cost of insurance being so high, there are a few ways for you to get it down. Mitigating any of the factors above is a start. Talking to an insurance agent is another way to find a few loopholes.

For a few secrets about insurance that you should know, check out our guide.

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