Why Do Some People Pay More for Car Insurance?

Car insurance protects drivers involved in accidents, whether with other drivers or on their own. Without insurance, drivers must pay the cost of damages and injuries out of pocket and risk license and vehicle registration suspension, higher insurance rates, and other consequences.

Still, drivers often fear purchasing insurance because of its cost. In the U.S., the average driver can pay about $1,674 per year, or $139 per month, for full coverage. However, many pay well above this amount. Car insurance companies use a variety of factors to determine customer rates, and this ultimately impacts the overall costs.

Some factors are within your means to control, but others aren’t as flexible. Nonetheless, purchasing an auto policy with the right insurance coverage will save you money, headache, and stress later. Auto insurance allows you to drive without fear. Plus, in most countries and U.S. states, it is illegal to operate a motor vehicle without at least some insurance coverage.

Compare your insurance choices now and be grateful later. The average driver has four crashes throughout their lifetime. Most people do their best to drive safely but no one is perfect, and accidents will happen. You might as well be prepared for them.

Let’s take a look at some of the most common factors auto insurers use to determine the cost of insurance coverage.

Credit

Keeping your credit up-to-par has plenty of benefits, one of which is lower car insurance rates. Statistics show that drivers with poor credit scores file more claims than drivers with better scores. So, expect higher rates when your score doesn’t meet expectations.

Personal Background

Your background can have a bearing on the cost of your car insurance premium. College-educated people are often charged less for insurance than others; the same is true for married couples. On the flipside, younger people tend to pay more. Some jurisdictions do not allow insurers to take gender into consideration, but in other areas, men tend to pay more than women for auto insurance, since statistics suggest men are more likely to take risks when driving. If you are unmarried, did not graduate college, or are male, these can result in higher than average car insurance rates.

Age

Teen drivers cause more accidents than drivers in other age groups, and insurance companies accordingly charge more to account for this higher risk. For example, a policy with a major insurance carrier can cost a 16-year-old driver an average rate of $4,003 per year, while a 50-year-old driver can purchase the same policy for just $933 per month.

In general, drivers get a break in cost once they turn 27 and age out of the high-risk category of drivers. In general, expect lower rates as you grow older, as long as you remain accident- and infraction-free.

Claims History

Drivers who have filed multiple claims in the past can also expect to spend more to insure their cars.

Business vs. Personal Use

Yes, whether you use your car for business or personal use does make a difference, because the type of policy needed for protection differs significantly. Business drivers can expect higher rates than drivers insuring their personal or family car.

Location

Where you live affects so many areas of life, including the costs you pay for healthcare, transportation, and housing. Car insurance often follows the same principle.

For example, in some regions, drivers pay nearly four times the national average rate for coverage. Your zip code certainly impacts the costs of insurance. Large cities and high crime neighborhoods have higher rates of vehicle break-ins, auto theft, vandalism, and accidents, and drivers in these areas are accordingly charged more for insurance.

Driving Record

Just one accident or speeding ticket on your driving record is risky and can increase your premium. The more infractions, the more expensive the costs will be. Keep your driving record as clean as possible to ensure you always drive off with the lowest auto insurance rates.

Coverage Level

No surprises here — different levels of coverage come with different costs. The minimum legally required insurance is usually the cheapest option, while full coverage is more expensive. In the U.S., most states require bodily injury liability insurance (BI) and property damage liability (PD).

The more coverage you choose, the more you will spend. Consider whether spending more for greater coverage is worth the cost before automatically assuming that it is the best option.

Discounts

Car insurance companies offer savings to both new and longtime customers: the average insurance company offers a 15 percent break on costs. As a consumer, it’s important to be aware and take advantage of as many discounts as possible. From safe driver discounts to loyal customer discounts, you can save a lot of money if you do a little research and know which questions to ask.

Spend a Little Time, Save a Lot

Many factors impact the cost of auto insurance, especially the ones outlined above. Other important factors include the age of your car and the make and model.

When you’re shopping for insurance, spend time comparing your options, inquiring about discounts, and figuring out what level of coverage you really need. You may not be able to control all the factors that will affect the cost of your auto insurance, but with just a little time and effort, you can find a policy that fits your needs and budget.