Many factors affect your car insurance rates. A lot of them make sense. For example, if you have a history of reckless driving citations, you can understand why an insurance company would consider you a higher risk and charge you higher premiums.
Some factors affecting your insurance rates are surprising, and others are even controversial. For example, your ZIP code can affect your car insurance premiums. If you compare auto insurance rates by ZIP code, you’ll see how much of a difference it makes.
Check out our list of 6 surprising factors that matter to your insurance provider.
Factor #1 – Your State of Residence Changes Your Insurance Risk
If you compare the average car insurance premiums in each of the United States, you’ll find that annual car insurance premiums vary by hundreds of dollars.
Michigan notoriously has the highest car insurance premiums because the state requires insurers to provide extensive and almost limitless coverage for injuries. Those living in states with fewer requirements for insurance tend to pay lower rates.
Factor #2 – Your Age Impacts Insurance Premiums
While it may surprise you that your age matters to your insurance provider, with a little explanation, you’ll likely understand.
New teen drivers pay the highest rates for car insurance of any age group. And males tend to pay more than females. Car insurance companies have to base their rates on statistics, and most states require insurers to prove that the statistics back their analysis of risk.
Since teens are more likely to be involved in an accident and file a claim than other age groups, their risk is higher, and their insurance premiums reflect that.
Drivers in their mid-20s to mid-60s pay about the same rates. This mid-age range tends to have a lower risk than younger and older drivers.
Once individuals reach their upper 60s, their driving risks start to increase, and their insurance premiums will likely reflect that higher risk.
Factor #3 – Your Gender Matters to Insurers
This factor is one of the more controversial ones that contribute to insurance premiums. A few states have even banned the consideration of gender in car insurance premiums. The states that have banned gender from being used as a factor in premiums are as follows:
- North Carolina
Even though the statistics clearly indicate that in some age groups, gender has an evident impact on a driver’s risk, these states have passed legislation preventing insurance providers from basing rates on that risk.
In states that allow insurers to consider gender, the most significant rate disparity is in the 16-21 age group. Males are more likely to file a claim, so they pay higher insurance premiums. In the middle age group, men and women pay similar premiums.
While you may find that one company charges females a dollar or two more a month, another charges more for male drivers’ policies.
Factor #4 – Your Credit History Affects Insurance Rates
Perhaps even more controversial than considering gender in premiums is factoring in credit history.
Even if you don’t agree with it, it’s easy to see there’s an argument to be made for basing rates on gender. But it’s harder to see the logic behind insurers formulating premiums on a policyholder’s credit score.
But since insurers can prove a correlation between credit scores and the risk of filing a claim, they are usually allowed to use credit history in their rate calculations.
Several states have banned or restricted the use of credit history in rate formulation for car insurance. However, in the states where credit scores are commonly considered in car insurance, an individual credit score makes a surprisingly significant difference in their premiums.
You should always carefully consider the pros and cons of taking out a personal loan or another type of loan, which could impact your credit score.
Factor #5 – Your ZIP Code Changes Insurance Rates
This factor is another highly controversial one. One argument against using ZIP codes to formulate rates is that the practice discriminates against individuals in specific neighborhoods. On the other hand, an argument in favor of this practice is that some areas experience higher rates of traffic accidents or vandalism, increasing the insurance company’s assumed risk.
It may not seem logical that someone on one side of a road would have to pay more than someone on the other side of the same road. But considering a ZIP code as a whole can help an insurance company accurately assess their risk.
Whether moving to a new city or just across the street, use that event as a reminder to evaluate your car insurance coverage to ensure you have an adequate policy for a fair price.
Factor #6 – Your Vehicle Could Result in Higher Premiums
The type of vehicle you drive matters to insurance providers for a couple of different reasons. First, if you carry first-party coverage like comprehensive and collision insurance, your insurer’s risk is directly related to your vehicle’s value and its cost of repairs.
So, a valuable car will cost more to insure than a lesser-value car because an insurance company would have to pay more to cover the value of a totaled vehicle worth $50,000 than one worth $10,000.
Another reason a car’s make and model affects insurance is that people tend to drive different vehicles differently. For example, those driving sports cars tend to drive more aggressively than those driving minivans. As a result, minivans are consistently on the list of cheapest vehicles to insure.
Of course, your driving habits don’t have to be dictated by the type of car you drive. But statistics demonstrate that some types of vehicles are associated with a higher risk of insurance claims.
Pay Less for Car Insurance Regardless of Your Risk
Whether you face a higher or low insurance risk, there are some easy ways to save.
First, compare quotes to see if switching insurance providers can help you pay lower premiums. Second, examine the available discounts from your insurer. You may be eligible for discounts you didn’t even know existed. Ask your insurer to help you make sure you’re getting all the discounts you’re entitled to.
And third, keep a good driving record because, after three claims-free years, you’ll see lower insurance premiums because your driving history indicates that you’re a conscientious driver.