When you bought your first car, friends or family may have shared this tip with you.
“Don’t buy red. The cost of insuring a red car is outrageous!”
The person who gave this advice probably meant well. But they were wrong, according to the Insurance Information Institute, which listed percentages affecting car color as one of eight insurance myths. But many factors matter when insurance companies decide how much you’ll pay for your auto policy.
Here are the factors that could determine your car insurance rates.
Where you live
Do you live in an urban or suburban area? Do you park your car on the street in town or in your own two-car garage? Or do you live in a rural area where cows outnumber cars? The Insurance Information Institute says that insurance companies take various geographic factors into account when setting your premiums.
Among them is whether you spend time driving on busy major city roads, where accidents, vandalism and theft are more common than in the suburbs, according to the organization. Other factors are based on your state and region and include everything from local costs to things like medical care, service center repairs and the weather.
Your driving history
Do you have a clean driving record — no traffic violations, no accidents? Or find yourself involved in fender benders once every few years? If you fall into the latter category, expect to pay increased insurance premiums.
The Insurance Information Institute says that if your driving record shows a history of accidents, you’ll likely pay more for insurance. The organization reported that if a claim is made against your policy for an accident that is primarily your fault, your insurer will increase your premium. Also, while how much depends on the company that issued the policy, increases will typically apply for three years.
Time on the road
Do you telecommute or drive 35 miles each way to and from work? If you fall into the first group and only use your car to run errands and transport the kids to and from school, insurance companies will charge lower premiums. The less time you spend behind the wheel means you don’t drive as many miles per year – reducing your chances of being involved in an accident.
Make and model of your vehicle
Do you own a sensible sedan or a lightning fast Ferrari? Your auto insurance agent will need to know the make, model, and age of your vehicle in order to quote an accurate price for your policy. The Insurance Information Institute said car-specific factors include purchase price, safety records, engine size, repair costs, theft rate and how much damage the vehicle could cause to another car in a crash.
In most states, laws allow insurance companies to review your credit-based insurance score as one way to help determine your rates. Credit reporting company Experian said the scores indicate whether a policy applicant is likely to make insurance claims. According to insurance giant Allstate, factors that affect your credit-based insurance score include your on-time payment record, accounts that have gone into collection, how long you’ve had credit and your debt load compared to your credit limits.
If you have a teenager, you know how expensive adding your child to your auto insurance policy can be — averaging nearly $2,000 a year, USA Today reported. Prices drop as your child enters adulthood, especially at age 25, and continue to drop as they reach their 30s. But they won’t be gone forever. A Forbes survey shows rates rising again in the mid-1960s.
If your children are in high school or college, they may qualify for a good student discount.
At least six states prohibit sex-based auto insurance pricing, but in states that don’t, men often pay higher premiums. This is because statistics show that women have fewer accidents overall and fewer incidents due to drunk driving. A 2021 study by the Insurance Institute for Highway Safety says men die more often than women in car crashes because men are more likely to engage in risky driving behavior.
The insurance coverage you choose affects your rates. A low deductible—the amount you’ll pay out of pocket for an accident—often translates into higher premium costs. So do the options, depending on whether your policy only covers the minimum required by law or has larger payouts in the event of an accident.
You can’t change your age, but your actions affect some of these factors, such as your credit history and the type of car. If you’re considering buying another car, a call to your agent before you sign the papers will let you know what you’ll be paying annually for your insurance.
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