What Affects Car Insurance Premiums?

Many people assume that your car insurance premium is fixed depending on what type of car you are insuring. While your vehicle of choice will impact your premium, this is not the only thing that matters when providers are determining your rates. There are several factors that affect your car insurance premiums. Understanding how your premium is calculated and how to set a deductible is the first step to finding a better rate on your car insurance. After all, once you know where your weaknesses are, you can work to strengthen them, lowering your risk level and your rates in the process.

Car Insurance Rate Factors

Your car choice will impact your rates. Car insurance providers place each vehicle into a group of 1 to 20. The higher your car level, the higher your premiums. Typically, smaller cars such as coupes, sedans and convertibles will come with higher premium rates than minivans, trucks and SUV's; however, the performance of the car, the safety rating, the cost to repair and parts and the security devices installed will also make a difference.

Another thing that will impact your car insurance premiums is your age. Young drivers tend to experience higher rates than older drivers with drivers over the age of 55 getting the best discount on their policies. Even gender can impact your rates with female drivers experiencing a 9 percent lower premium than their male counterparts, on average.

Your driving history will also heavily impact your premium. If you have made several claims in the past or if you have several red ticks on your record (traffic violations, DUI offenses, parking tickets, etc), then you can expect higher premiums than if your driver history is clean. If you have just got your license your driver history will be clean but you don't have the experience just yet to get the best rates. Once you have been driving for three to five years and have kept a clean record during this time, then you will receive the best rates out there.

Understanding your Premium

Even your credit rating will impact your car insurance. Why is this? Providers believe that finically responsible people are also responsible drivers. While there is some debt that you cannot avoid, keeping your credit card debt down and other unsecured debt to a minimum will prove to providers that you are responsible with your money. This will give them the confidence to offer you a better rate.

Even where you live will impact your car insurance. Drivers living in larger, busier cities can expect higher rates than drivers in rural communities. Furthermore, if your city comes with a high theft and crime rate, then your premiums will also be higher. Make sure you compare your average car insurance by state to see where you compare in terms of your particular area. While the average driver in America pays around $750 for their coverage, if you live in states such as New Jersey, District of Columbia and Louisiana, you can expect premiums higher than $1000. If you live in North Dakota or Idaho, however, the average premiums are closer to $500 per year[1].

Providers consider all of these factors that affect insurance premiums together. Providers will place you into a category based on your risk level which will make your premium. Car insurance providers are all different and place different emphasis on each factor. What this means is that is pays to shop around and see where each provider ranks you in terms of your risk level.

[1] http://www.iii.org/facts_statistics/auto-insurance.html 04/28/2011

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