When you’re shopping around for car insurance, you may wonder what factors influence your rates. Insurers use a variety of criteria to determine your premium. They use this information to determine the likelihood of you making a claim (and paying your bill on time), then set your rate based on your potential risk level. Essentially, people who are more likely to get into accidents or have expensive claim payouts are likely to have higher premiums.
So how is car insurance calculated? Here are some of the top factors that insurers may use to set your rate.
1. Type of Car
The make, model, and year of your car can all influence the cost of repairs and replacement. Insurance companies know that repairing an expensive, brand-new car often costs more than older cars with cheaper parts. By reviewing the claims associated with similar cars, insurers can assess the potential costs of insuring your car.
However, having an older car doesn’t always mean cheaper coverage. If your car lacks certain security and safety features, you may also end up paying a higher premium to offset the risk of theft and accident.
2. Driving History
Your driving habits give insurers valuable information about your risk of getting into an accident. If you have a DUI conviction or a history of getting tickets, insurers are likely to view you as a high-risk driver. In this case, your insurance will likely be more expensive to make up for the risk of unsafe driving habits. Likewise, safe drivers typically qualify for lower rates.
This can also extend to your claims history. If you’ve made several claims in the past, insurers may increase your rate to offset the cost of future claims.
3. Level of Coverage
There are several different coverage options that you can explore when buying insurance. Some people only purchase liability to protect themselves from claims from other drivers. Others, particularly those with newer cars, sign up for full coverage that will pay for damage to their own vehicle. If you want more coverage, your policy will probably cost more.
Each state has different minimum coverage requirements, which can influence the cheapest available rate in your area.
4. Age
Age is one of the demographic factors that insurers use to determine your risk level. Because younger drivers have less experience on the road and typically drive more recklessly, they’re more likely to get into accidents. This means they usually have the highest rates of any age group. As you get older and gain more experience on the road, you can benefit from lower rates. Typically, you’ll start seeing your rates go down once you turn 25.
Drivers in their 70s and 80s may also start seeing an increase in their car insurance rates. This is because senior drivers have a higher risk of being in an accident and being injured than younger adults.
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5. Gender
Your gender can also affect your premium. Auto insurance companies consider male drivers to be riskier. When combined with other factors, your gender can make an even bigger impact on your rate. For example, a teen male driver would likely have a much higher premium than a 30-year-old female driver, even if they had the same level of coverage.
6. Average Mileage
Your average yearly mileage influences your insurance rate because it indicates how much time you spend on the road. The more you drive, the more opportunities you have to get into an accident. This means that even safe drivers may have a higher rate if they have long daily commutes or use their vehicles more than average. If you have low annual mileage, you may benefit from a lower rate.
7. Credit History
You may think that your credit score has nothing to do with your driving habits. But insurance companies see a correlation between having good credit and making fewer insurance claims and paying your bills on time. If you have poor credit, insurers may flag you as a potential risk and give you a higher rate.
Finding the Best Rate for Your Car Insurance
Even if these factors qualify you as a high-risk driver, you can still find cheap insurance. SR-22 Adviser offers affordable insurance that helps you stay covered in any circumstance. Contact our partner for a quote today.