Car insurance is a devil that every car owner must deal with. However, it doesn’t mean you must empty your pockets to keep your car insured. By understanding how premiums are calculated and the critical factors that affect your premium, you can be a savvier consumer and save money on your policy.
One thing you must remember is that you cannot change facts. Therefore, you must be honest while sharing crucial details with your insurance company to avoid any penalties. The insurance company decides the premium after analyzing the given data.
However, you must also be smart enough to steal a deal that will favor your bank account. Here are some of the critical factors that affect your car insurance premium:
1. Car Model and Make
The kind of car you drive is one of the most critical factors in determining your premium. Luxury cars, for instance, have a higher insurance premium than economy cars. This is because luxury cars are at a greater risk of being stolen.
In addition, if you’re driving a sports car, you’re likely to pay more for your insurance since they’re also considered high-risk vehicles.
Consider buying a mid-range car instead of a luxury or sports car to lower your car insurance premium.
2. Driving Record
Your driving record is one of the most essential factors in determining your premium. If you have a clean driving record, you’re considered a low-risk driver and will likely pay less for insurance than someone with a poor driving record.
On the other hand, if you have a history of accidents or traffic violations, you’re considered a high-risk driver and will pay more for insurance.
To get the best premium possible, make sure to keep your driving record clean.
3. Credit Score
Did you know that your credit score can affect your car insurance premium? This is because insurance companies use your credit score to determine how likely you are to file a claim.
You’re considered a high-risk driver and will pay more for insurance if you have a poor credit score. On the other hand, if you have a good credit score, you’re considered a low-risk driver and will pay less for insurance.
To get the best premium possible, make sure to keep your credit score high. Some of the things you can do to keep your credit score high are to make all your payments on time and keep your credit card balances low.
You can also check your credit score for free once a year by requesting a copy of your credit report from one of the three major credit bureaus: Equifax, TransUnion, and Experian.
Where you live can also affect your car insurance premium. If you live in an urban area, you’re likely to pay more for insurance than someone who lives in a rural area.
This is because urban areas have a greater risk of accidents and theft. In addition, urban areas tend to have more traffic, leading to more accidents.
Also read: Does Car Insurance Cover Natural Disasters?
On the other hand, if you live in a rural area, you’re likely to pay less for insurance since there’s less risk of accidents and theft.
However, this is not always the case since some rural areas have a higher risk of natural disasters such as floods and earthquakes. So, if you live in an area prone to natural disasters, you may pay more for insurance, even if it’s a rural area.
5. The Amount of Coverage You Need
Another factor affecting your car insurance premium is the coverage you need. If you only want the minimum amount of coverage required by law, you’re likely to pay less for insurance than someone who wants full coverage.
Also read: How Much Car Insurance Do i need?
However, it’s important to remember that the minimum amount of coverage may not be enough to protect you financially if you’re involved in an accident. So, if you can afford it, you should get more than the minimum amount of coverage.
Gender is another factor that can affect your car insurance premium. Studies have shown that men are more likely to get into accidents than women.
As a result, insurance companies charge men higher premiums than women. However, this gender-based pricing is not allowed in all states. In fact, some states have banned gender-based pricing altogether.
Your age can also affect your car insurance premium. Young drivers (aged 16 to 24) are considered high-risk and pay more for insurance than older drivers.
This is because young drivers are more likely to get into accidents than older drivers. In addition, young drivers tend to have less experience behind the wheel and are more likely to take risks when driving.
However, as you get older and gain more experience, you’re considered a lower-risk driver and will pay less for insurance.
Lastly, your deductible amount will play a critical role in determining how much you pay in insurance premiums. A deductible refers to the amount of money you have to pay out-of-pocket before your insurance company starts paying for damages.
Typically, the higher your deductible, the lower your premium will be. This is because you’re taking on more of the financial risk if you get involved in a car accident. Conversely, the lower your deductible, the higher your premium will be.
This is because your insurance company will have to pay more if you get into an accident. When choosing a deductible amount, make sure it’s an amount you can afford to pay in the event of an accident.
The factors that affect your car insurance premium are diverse and many. While some of these may be beyond your control, there are steps you can take to lower your rates.
Understanding the various aspects that go into premiums is a good place to start. Reviewing your policy regularly and shopping around for competitive rates are also essential in keeping costs down.
Are there any other critical factors we missed? Let us know in the comments!