9 Major Factors that Affect the Cost of Car Insurance
Many of these factors are related to "life changes" such as moving, retiring, or even getting married.
Whenever you experience a change in one of these areas, it's wise to comparison shop your car insurance because each insurer calculates these factors differently.
The price savings can be huge - saving you up to $1,000 per year in some cases.
Let's take a look at the 9 key factors that affect car insurance rates:
Changing Your Job
One big factor that affects your car insurance cost is the number of miles you commute to work each day. The shorter the commute, the less likely you'll get into an accident.
If your daily commute is less than 5 miles, you may qualify for a low-mileage discount. (Typically, this is for people who drive less than 7,500 miles per year).
Change of Address
Moving to a new address can affect your car insurance premiums in a big way.
Typically, if you move from a suburban area into a large city, your premiums will rise significantly due to the increased risk of theft and damage to the vehicle.
Insurance companies keep detailed statistics on accidents, thefts, and insurance claims for every city and will either reward or penalize you based on these historical factors.
Where you store your vehicle overnight can also affect your car insurance premiums. If you have to leave your car parked on the street, you'll have to pay a higher premium than if you have it garaged.
Each insurance company weighs these factors differently, so it always pays to comparison shop when you change addresses.
Type of Car You Drive
The type of car you drive can have a major impact on the cost of your car insurance. The more expensive the car, the more you will have to pay to insure it.
Other factors include the historical cost to repair that vehicle, its overall safety record, and the likelihood of theft.
Amount of Coverage
Each state has a minimum amount of coverage you're required to get for car insurance. Most of the time, these requirements are too low and will not cover you fully if you have a major accident.
The more coverage you get, the higher your insurance premiums will be.
The amount of your deductible also plays a major role in the price of your premiums. The higher your deductible, the lower your premiums will be.
This may come as a big surprise to most people, but your credit score can affect your car insurance rates.
Some insurance companies will discount your premiums by up to 50% if you have an excellent credit score while other companies don't even factor credit scores into their prices.
The reason credit scores are a factor is because studies have shown that people with poor credit are more likely to file insurance claims since they're usually strapped for cash.
Check your credit score for free here.
Adding a teenage driver to your car insurance policy can easily double your cost, especially if they're male.
Teenagers are likely to be more reckless and cause more accidents due to inexperience.
Some insurance companies even refuse to insure teenage drivers, while others offer discounts for good grades and completion of driver-education courses.
Again, it really pays to shop around if you will be adding a teenage driver to your policy.
Getting married or divorced mostly affects car insurance rates for those who are under 30 years old.
Insurance companies have learned that accident risk goes down if someone gets married early on in life.
Likewise, if you get divorced while under 30, your insurance premiums may go up slightly.
The bigger advantage of being married is that it qualifies you for multicar discounts.
As long as a married couple is living under the same roof, they will qualify for this large discount.
If you're ever at fault in a car accident, receive a moving violation, or file a car insurance claim, you will usually trigger an automatic premium increase.
The amount differs significantly from company to company. Some insurance providers let you off the hook if this is your first ticket or accident, while others will raise your rates through the roof.
Raising your car insurance deductible will help offset the rise in your premiums (we recommend a $1,000 deductible to maximize savings).
One of the benefits of retirement is lower car insurance costs.
When you retire, you no longer have to commute to work and will only be using your vehicle for pleasure. This reduces the amount of miles you drive - thus lowering your premiums.
One important note: you will need to notify your insurance company when you retire so they can apply the discount.
3 Steps Every Car Buyer Needs to Take to Save Maximum MoneyThe key to getting the best deal is to gather price or lease bids from as many local dealers as possible. Then shop that best price around until no one can beat it. Here are the steps:
Step 1 Get Prices From My Trusted NetworkSelect the vehicle you're interested in to see if there are local dealers in my network who will provide you with their best upfront price. You will get direct access to an internet sales manager who you can further negotiate with online (no need to visit dealership).
Step 2 Get Prices From TrueCar / CarsDirectTrueCar, and CarsDirect are my top 2 online price quote recommendations. These services show you pre-negotiated prices from dealers closest to you - and the deals are usually pretty decent. But remember, you can still negotiate further.
Step 3 Complete my ChecklistFollow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid