What Makes Car Insurance Rates Go Up And What Can You Do?

What makes car insurance rates go up

What makes car insurance rates go upIt’s that time of year again when you need to deal with your car insurance. Perhaps you’re looking for a new policy and the premium rates you are being offered are higher than you expected based on the market average. Perhaps you are renewing with your existing insurer and they have raised your premiums.

You’re probably asking yourself what causes car insurance premiums to increase—and what you can do about it!

We have put together a comprehensive list of the most important things affecting your car insurance premium rates, along with advice on what you can do to reduce your rates and save on insurance.

Without further adieu, here are the 10 most important factors influencing your car insurance premiums.

1. Your Demographics & Driving Experiences

Car insurance companies use a range of demographic statistics to determine who is most likely to have an accident and therefore most likely to make an insurance claim they will need to pay out on.

Based on the data collected by the industry over the years, they make a variety of assumptions about drivers based on who they are. For example:

  • Female drivers tend to have less serious, and therefore less expensive, accidents than male drivers
  • Young drivers are more likely to have accidents than experienced drivers (insurance companies generally consider someone an inexperienced driver until the age of 25.)
  • Married men tend to have fewer accidents than single men
  • Drivers with college degrees tend to have fewer accidents than other drivers

And the list goes on.

What Can You Do?

Short of getting married for the purpose of lowering your car insurance rates—which is no doubt a false economy—there is not much you can do to change your demographics. But that doesn’t mean you can’t lower your rates.

If you are in an at-risk category that pushes your rates up, many companies will allow you to do things, such as take a defensive driving course, to reduce your risk. This can typically knock five to 20% off your car insurance premium.

2. Your Driving Record

Naturally, your driving record will be very important to insurers in terms of determining how likely you are to have an accident and therefore how likely you are to make a claim. To understand this, they will look first at your CLUE report, which is a list of all the insurance claims (not just auto claims) you have made over the last seven years. Yes, your insurance rate will go up if you have made a comprehensive claim, even if it was with another insurer.

They also look at your driving record: speeding tickets, running red lights, and convictions for DUI. These can all push your premiums up.

What Can You Do?

If you have a bad driving record, you might think there is nothing you can do. But, in addition to taking a defensive driving course, some insurance companies will let you install a dashcam that monitors your driving. If you drive well, you can earn points that lower your insurance premiums.

If you have high insurance premiums because of a poor driving record, it is a good idea to shop around for insurance companies that support these above-mentioned kinds of discounts.

3. What Car You Drive

What car your drive has a significant impact on your premiums. If you drive a more expensive car, it is more expensive to fix, so it will be more expensive to insure. But expense is not the only factor. Larger cars are generally considered safer, as are cars with safety features such as airbags and automatic seatbelts. These features, common in newer cars, will also lower premiums.

Some features, such as a powerful engine, will also raise premiums, as they are thought to make cars more dangerous.

Cars that are considered desirable by thieves will also be more expensive to insure (watch the first The Fast and the Furious movie if you aren’t sure what we mean).

What Can You Do?

This is something young drivers should look out for. You might scrimp and save to buy a classic V8 that you have had your eye on, but then, because you are an inexperienced driver, it is almost financially impossible to insure.

Young drivers can save a lot by investing in a safe and sensible car, and waiting a few years to invest in their dream machine.

4. Own Or Lease

A leased car can be a lot more expensive to insure than a car you own outright, but this has more to do with the leasing company than your insurance provider.

Many leasing companies have strict rules when it comes to insuring their cars, which include a level of insurance higher than the state minimum comprehensive coverage, with low deductibles and gap insurance to cover the cost of the car if it is written off.

What Can You Do?

When you are looking at a lease car, you need to factor in how much it will cost to insure the car when considering what you can afford in monthly payments. It is also worthwhile to shop around for leasing companies, as they all have different rules on their insurance requirements and some will be cheaper than others.

5. How Much You Use Your Car

The more your drive, the more opportunities you have to be involved in an accident and therefore the more you will have to pay for insurance. If your profession means you spend a lot of time on the road, you’ll pay more. If you only drive occasionally, which insurers call “pleasure use,” you’ll pay less.

What Can You Do?

If you need your car for work, you will clock up the miles, and there isn’t much you can do about that. But if you are struggling to insure a car you use for pleasure, keeping mileage down by taking other means of transport when convenient may lower your premiums a little.

6. Your Location

Where you live makes a significant difference to your insurance. If you live in a high-traffic area, as opposed to a small town, you will pay more. If you live in an area where vandalism rates are high, you will pay more. Insurers also consider how much it costs to fix your car in certain areas. In some places, mechanics charge a lot more than others.

Where you park your car also matters. You will pay more if you park your car on the street, where it is accessible to thieves and vandals, than if you park your car in a garage.

What Can You Do?

Secure off-road parking for your car. If you can’t park in a garage, parking it in a driveway is still considered preferable by insurance companies as opposed to parking on the street.

7. Your Insurance Credit Score

Your insurance credit score is a measure of how likely you are to make an insurance claim. It is based on a combination of your credit score and your claims history. A low score means you are very likely to make a claim, and this will push up your premiums, while a good score can earn you discounts.

You can learn everything you need to know about insurance credit scores here.

What Can You Do?

Taking active steps to improve your credit score will improve your insurance score and therefore lower your premiums. This means paying bills on time, lowering debts, and limiting any new credit inquiries for a period of time.

8. Type Of Insurance

What type of insurance you are looking for will naturally impact your premiums. You will pay more for comprehensive coverage than if you are just looking for collision coverage to protect yourself from liability in the event of an accident.

The level to which you insure yourself will also make a difference. Different states have different mandatory minimums for the level of insurance you need. You can find links to the requirements for your state here.

But as well as the level, the deductible you are willing to pay before starting to claim on your insurance can make a big difference. You will pay a lot less if you agree to a $5,000 deductible than a $500 deductible.

What Can You Do?

Choosing a policy that covers you for what you need, and that you can afford, is often a delicate balancing act. There is no point in agreeing to pay a $5,000 deductible to lower your premiums if there is no way you will be able to raise those funds in the event of an accident.

In most cases, if your car isn’t vital to you for work, you can save money by skipping the comprehensive insurance that will see your car fully repaired if you are at fault for an accident,  and just invest in collision insurance to cover your liability for the other car, and bodily injury insurance to cover the medical care for yourself and any passengers in your car.

9. Other Insurance Policies

If you have other insurance policies, such as household insurance, your insurance provider will often give you a discount. Insuring multiple cars within a household, even if they have different drivers, with the same insurer can also produce discounts.

What Can You Do?

Try bundling all of your insurance needs together and see if your insurance company will give you a discount if you do all of your insurance business with them.

10. The Insurance Company

While insurance companies largely look at the same things when determining premiums, they do balance things differently and use slightly different formulas. This is why different insurance companies will offer you different rates for the same services.

What Can You Do?

Shop around for your insurance. You shouldn’t always go for the same insurer your family and friends use, as your specific circumstances may mean you get a better rate elsewhere. For example, there are companies that specialize in inexperienced or at-risk drivers and will offer young drivers lower rates, and there are other insurers that don’t look at credit score when calculating premiums.

For a list of reliable insurance companies to consider as part of your search, read our review of the top insurance companies.