What factors determine your auto insurance rate?

April 01, 2014 | Paul Brucker

When your auto insurance is up for renewal and you get your new bill in the mail, do you feel some suspense before you open the envelope and discover what your premium will be?

Did you know that the “average” policyholder makes a claim just once every 11 years and reports a total loss every 50 years? But auto insurers don’t look at you as average. Rather, they try to see you more closely and relate you to your recent driving occurrences and the historical loss experiences of people similar to you.

Insurers price you according to a bottom line: how likely are you to wind up making or causing a costly claim against them. And to determine the specific cost of your premium, each insurer uses its own proprietary calculations that take into account dozens of factors. Here are factors that generally have the most weight in controlling your premium: 

  1. Your driving record. The old adages apply: history tends to repeat itself and those who don’t learn from their mistakes are doomed to repeat them. If you’ve gone many years without an accident or claim, then you’ll get a lower premium than people involved in multiple claims, even if they weren’t at fault. It’s essential to obey traffic laws and keep alert to avoid accidents. Even being involved in a fender bender that wasn’t your fault can hike your premium. Expect a bigger hike if you were at fault because you were speeding, running a red light or driving drunk. Sometimes all it takes is one speeding ticket to double your premium. Meanwhile, as a rule of thumb, drivers nabbed for driving 15 miles over the posted speed limit get higher rate increases than those ticketed for going five miles over. Also non-moving violations, such as parking tickets, have minimum impact on your rate.
  2. The car you drive. The make, model and year of your car have a big influence on your premium, particularly your car’s sticker price, repair costs, safety record and reputation for being stolen. Unless your car is a pricey classic, expect your premium to be higher if your car is new and the cost to repair or replace it is higher. And if you have a red car will you pay more? No, that’s a myth. Your car’s color has zero impact on your rate, according to the Insurance Information Institute.
  3. The coverage you choose. Opting for the right deductible can help reduce your premium. Your deductible is the amount of money you agree to pay toward a claim before your insurer pays the rest of the tab. If you’re willing to elect a higher deductible and pay more out of pocket for a claim, then you may enjoy hefty savings on your premium. For instance, changing from a $250 to a $1,000 deductible could earn you a 25% to 40% savings on your policy, according to dvm.org.
  4. Your age and other demographics. It’s perfectly legal for insurers to factor your age, sex and marital status into their premium calculations – and they do. Drivers under 25 years old, especially unmarried males, get charged more because they cost more to insure. Teens pay most because, statistics show, they are far more likely to get into accidents. Personal driving record aside, if you are between the ages of 40 and 50, then statistically, you are among the safest drivers. 
  5. Where you live and how much you drive. If you live in an urban neighborhood, you may get socked for higher rates associated with higher incidents of theft, accidents and vandalism. Plus, the more time you spend behind the wheel, the more you’re exposed to risk. If your commute to work is 60 miles a day, you can expect to pay more than someone who has a five-mile drive to the office – or someone who works from home.
  6. Discounts you qualify for. Common discounts you may be eligible to receive include insuring multiple vehicles with the same provider, having multiple policies (for instance, home and car insurance) with the same provider, being a safe driver and driving a car with safety features (such as anti-theft devices, anti-lock brakes, air bags and automatic seatbelts).

    If you haven't compared auto rates lately, it's a great time to take a look. Alliant Credit Union membership could result in some nice auto insurance savings.


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