7 Important Factors That Affect Car Insurance Rates

Did you graduate from college?

Around 36% of Americans have a bachelor’s degree. In addition to qualifying for higher-paying jobs, having an education can also pay off when it comes to the insurance world!

A lot of insurance companies are happy to offer discounts to customers who at least have a 4-year college degree. The reasoning behind the discount is that educated drivers are more likely to follow safe driving practices. By understanding the factors that affect car insurance rates, you can work towards lowering your monthly premiums.

What type of discounts or policy adjustments could help you save? What car insurance factors are out of your control? Read on to find out!

  1. Driving Experience

First, on our list of factors that affect car insurance rates, let’s talk about driving experience. Are you a young driver with no driving experience, or an older driver who just got their license for the first time?

When you don’t have driving experience, you can expect your car insurance rates to be higher than people who have been driving for years. One of the reasons is that insurance companies assume your lack of experience makes it more likely you’ll be involved in a crash.

However, your driving skills aren’t the only reason new drivers get charged more. Not having a driving history, is a lot like not having credit. While you might not have bad credit, not having any credit makes it hard for lenders to evaluate if it’s safe to give you a loan.

In the same way, lenders take a risk when they give you a loan, car insurance companies take on a risk when they insure a new driver. By charging higher rates, the car insurance company can make the risk worth the reward.

  1. Coverages and Deductibles

Are you wondering how to save on car insurance by adjusting your policy? First, you should talk to your insurance provider and ask them about discounts they offer, such as safe driving rewards. If your company doesn’t offer safe driving discounts, get a quote from a company that does.

Next, you can also look into adjusting your coverages and deductibles. The lower your coverages are, the less expensive your monthly rates will be. However, be careful to not drop your limits so low that you’re not fully covered in the event of a crash. For instance, lowering the comprehensive and collision coverage can be a wise move if you have an older car that’s not worth much.

Whereas lowering your liability limits could put you at risk of a lawsuit if you’re found at fault in an accident. Next, raising your deductibles can usually save you even more money than lowering your coverages will. Deductibles are the amount you have to pay before certain coverages, like comprehensive and collision kick in.

However, once again, don’t make a change that will hurt you financially if a crash takes place. Only raise your deductibles to a limit you’ll be comfortable paying if you need to.

  1. Your Zipcode

Let’s say you adjust your coverages, deductibles, and you have a ton of driving experience. However, you still notice your monthly insurance rates are much higher than your friend who lives in a different city. Why are you getting charged more? It turns out, your zip code plays a big role in the cost of car insurance.

If you live somewhere with a lot of car accidents, or vehicle theft, insurance companies are going to charge you higher premiums. On the bright side of things, if you’re a homeowner, you may be in luck. Oftentimes car insurance companies are eager to give discounts to homeowners since they tend to be safe drivers.

  1. At Fault Car Accidents

Moving on, you’re probably aware that having accidents on your driving history can make your insurance rates skyrocket. However, what’s not clear is exactly how much your rates go up, and for how long.

The state you live in will play a big role in determining how car insurance companies respond to motor vehicle records. It’s worth your time to go online to your local DMV to see how long driving incidents stay on your record.

  1. Black Cloud Syndrome

What if you’re in a lot of car accidents, but they’re not your fault, could your rates still go up? Absolutely. Insurance companies have a term called the “black cloud syndrome”. Someone listed as having the black cloud syndrome is seen as a higher risk because they have a high number of claims.

While it’s not fair, having a lot of claims on your insurance policy can make your rates go up, and stay up. An extensive claim history can also make it difficult to secure new insurance policies down the road.

  1. Defensive Driving 

It’s possible that a defensive driving discount could help lower your monthly rates. However, before you sign up for a defensive driving course, double-check that you’ll be able to receive some type of discount from your insurance provider. Again, if you’re company doesn’t offer the discount you need, don’t be afraid to shop your policy around.

  1. Vehicle Car Insurance Factors

Lastly, the cost of car insurance has a lot to do with the type of car you’re driving. If you’re in the market for a new car, but you’re not sure what one you want, get quotes from insurance companies.

Let the company know the exact year, make, and model of the car you’re considering buying. Next, find out what full coverage would look like. Make sure you get at least 3-5 quotes since prices vary a lot from one insurance company to the next.

Understanding the Factors That Affect Car Insurance Rates

Now you know some of the top factors that affect car insurance rates. There’s a lot of factors out of your control, like your driving experience, or where you live. However, remember, you have the power to shop your policy around. The insurance industry is highly competitive, and if your provider isn’t giving you a fair rate, it can’t hurt to get alternative quotes.

When you’re getting quotes, be sure to play around with your coverages and deductibles to see what policy will work best for you. Are you ready for more tips? Check out another article!


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