21 Factors That Affect Your Auto Insurance Premium – How To Lower Your Cost

Auto Insurance Premium - lower your cost

The insurance premium that you pay for your auto or car insurance is affected by a number of factors. By knowing what these factors are you can at the very least understand know how the premium is calculated and know which of these factors you can change to make sure that you aren’t paying too much.

21 factors that affect your auto insurance premium are:

1. Your Age:

Young drivers under the age of 25 will pay more than drivers over 25. Those under 25 have only had limited experience in driving and knowing the road rules, so are deemed as being a higher risk by auto insurance providers.

2. Car Model/likelihood of theft:

Some cars are more attractive to thieves than others. However, installed car alarms or other anti-theft devices can help lower the premium that auto insurance providers will charge.

3. Age of Car:

Often an old car because of its depreciated value and condition may mean that if it were in an accident and was severely damaged that the cost of repairing the car may be more than the car is worth. For newer cars, the insurer may opt to repair it as the cost of repair would be less than the cost of replacing it. Often with an old car you may not want to take up the collision coverage (which will increase your insurance premium) and if in the case of an accident where your car is written off you, buy another old car to replace it.

4. Modifications:

Cars that have been ‘done up’ with modifications will increase your insurance premium as the replacement value will be higher than a standard motor vehicle.  Find out more in this article on the subject.

5. Replacement value:

The cost of replacing your car is a major factor to consider. Obviously a brand new expensive sports car will cost substantially more to replace than a beaten up old bomb, hence your auto insurance premium will be much higher.  You might like to read another article of ours which gives further information on the topic of the value of your car and the insurance premium you pay.

6. Driving history:

Your car insurance premium will be higher with the more claims, traffic and parking tickets, and DUI’s you have. Bad drivers are penalized and good drivers are rewarded.

7. Driving activity/mileage:

As a general rule, many car insurance providers will provide a discount if you don’t drive that much and may alter your rate based on where and when you drive (example if you are commuting to work on a regular basis in traffic), and the distance you drive.

8. Previous insurance claims:

Your previous claims history and the nature of the claims may have a large bearing on the insurance premium that car insurance providers will charge you.

9. Safety and security devices/vehicle safety rating:

Car alarms, side airbags, anti-lock brakes, tracking devices or any other features that lower the chances of theft or injury will  help to lower your auto insurance premium.

10. Zipcode:

Where you live also plays a large role in calculating your auto insurance premium. Some places have higher rates of crime. For example, Detroit drivers paid over 5 times more for their insurance premiums in 2005 than did drivers from some of the least expensive cities such as Green Bay Wisconsin ($948) or Chattanooga Tennessee ($911).

Providers usually offer lower insurance rates for people who live in rural areas because they are deemed a lower risk.

11. Gender:

Typically men between the ages of 16 and 25 pay more than their female counterparts. Men in general are greater risk takers and therefore the likelihood of an insurance claim is increased.

12. Students:

Some auto insurance companies offer a discount for students under the age of 25 to pay lower insurance rates.

13. Collision or comprehensive coverage:

Collision and comprehensive auto insurance isn’t worth getting for old and less valuable cars and will save you money on your car insurance premium

14. Vehicle size:

Size does matter. Generally, larger cars are safer than smaller cars in an accident. Having said that, cars with larger engines relative to body size will often have higher insurance rates because of the increased risk of speed in accidents.

15.  Marital status:

In general, married men have less accidents, and if you have a clean driving history this may lower your rates significantly.

16. Credit score:

A good credit score will ensure you receive a lower premium. You can get a free credit report online.

17: Paying the minimum liability cover:

It is wise to pay what will cover your car in an accident, however it is up to you if you want to pay only the minimum cover.  Obviously minimum liability cover will be cheaper but is it the right choice for you?

18. Type of driving:

Your insurance premium can be affected by whether you use your car for pleasure, business, or commuting. Whether you park your car under cover and locked up in a garage or if it is parked on a street also is a factor that insurance providers look at when calculating premiums.

19. Your deductibles:

If you choose higher deductibles,  you will pay lower premiums.  And if you choose lower deductibles, you will pay higher premiums. Beware to find out what the excess cover is in the event of a claim, as you might be in for a nasty surprise with how much excess you have to pay in the event of a claim.

20. The insurer:

Simply by shopping around, you can most likely save yourself money on your insurance premium. You may even talk to your existing insurer and ask them for a discount if you have found an insurer who will offer the same policy for a lower rate in order to have the history and continuity with your existing insurance provider.

21. Bundling your insurance:

Bundling your life, home and car insurance together with the same insurer may also be away to save money on your car insurance as often they will provide discounts for your loyalty. The longer you are with the same insurer, this can also lead to them providing you with discounts for your loyalty.

You may notice that some are car related factors, others driving habits, and others to are personal circumstances such as gender, marital status or credit history.

There are many expenses when owning a car, and car insurance must be carefully looked at to ensure that you are getting the best deal and you are covered when you need it the most.

Other factors that may help to reduce your premium include discounts offered by insurance providers if you are a member of an auto association or alumni.


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