5 Factors That Influence Your Car Insurance Rates

Man looks over his car insurance contract

Car insurance is essential for drivers today. Not only is it forbidden to drive without insurance in all 50 states, but that car insurance can also help you cover any costs if you get into an accident.

Many drivers want the least expensive insurance rates they can find while still receiving good coverage. But what you may not realize is that many factors, both on and off the road, can greatly affect what you’ll pay for insurance.

Factor #1: Where You Live

According to Bridget Clerkin of DMV.org, location is the single most important indicator of how much you’ll pay for insurance. Rates vary depending on what state you live in and even the area of the state you call home.

North Carolina had one of the lowest insurance rates in 2017 with an annual average of just $865, according to DMV.org. Meanwhile, Michigan residents had to pay up to $2,610 that year.

Writing for The Penny Hoarder, Dana Sitar says that drivers in urban environments tend to pay more for their insurance. This is because of the higher rates of auto thefts and accidents in a city versus in a rural area.

Factor #2: The Cost of Your Car

Carroll Lachnit of Edmunds explains that another important factor in determining your insurance rate is the kind of vehicle you drive. Generally, the more expensive your car is, the more you’ll have to pay to insure it.

Vehicles like the Honda CR-V cost roughly $1,317 per year to insure, while insuring a model like the Mercedes-Benz E-Class could cost as much as $3,541 per year. Furthermore, insuring a used car generally ends up costing less than insuring a new vehicle. Additionally, repairs for a more advanced car tend to cost more than a car with less complicated systems.

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Factor #3: Your Occupation and Education

Not every factor in determining your insurance rates are under your control. Even your age and marital status can affect what you’ll pay. Clerkin says that teenage drivers often incur the most expensive insurance rates. Additionally, men typically pay more for car insurance than women.

Other demographic factors that can affect your score include your education and occupation. Drivers with graduate degrees generally pay less for insurance than those with no high school diploma.

Factor #4: How You Drive

One factor that you do have control over is your driving history. Clerkin notes that a less-than-stellar driving history can cause insurance rates to increase. Speeding tickets can be a major cause for insurance rate increases. If you accumulate speeding tickets, your insurance can go up by as much as 28 percent.

However, collisions cause rates to increase even more. According to Clerkin, a not-at-fault accident generally leads to a seven percent rate increase, while those at fault can see insurance rate increases up to 85 percent.

Factor #5: Your Credit History

Your driving past isn’t the only history that could affect your car insurance. Kelley Blue Book notes that your credit history can have one of the greatest effects on your car insurance rates.

Sitar also references a University of Texas study that found that people with lower credit scores incur more losses and higher claim payouts. Still, certain states don’t allow insurance companies to consider this factor. California, Massachusetts and Hawaii are among the states where your credit score won’t affect your insurance rates.

You may also like: Six simple ways to up your credit score >>

Clean Up Your Personal Spending Habits

Understanding the personal habits that affect your credit score and other factors can help you eventually secure a better insurance rate for your vehicle – and saving money is a great way to start off the new year.

Want more help saving for retirement or future goals? Learn about Minster Bank’s savings accounts and choose one that’s right for you.

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Published by Minster Bank
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