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Updated: 27th November 2023
Insurance companies use so many data points to calculate your insurance premium that it's impossible to know them all. The tricky part? Each company uses different metrics to give you a final quote. We're sure you will find several of these factors surprising.
As always, at OCHO, we are here to simplify the insurance world for you and make it transparent.
Have a read through this guide so you can equip yourself with information. There will be some factors you have no control over, but hopefully, you can find some solid advice here to help you make the right choices for you and your family.
Here's what we'll cover:
Personal Details
Driving History
Your Vehicle
At-fault Accidents
Location
Credit Rating
Payment Gaps
Coverage
Shopping Around
What is the Impact of Age on Insurance Premiums?
The road from adolescence to adulthood is marked by more than just milestones; it significantly shapes the cost of your car insurance.
Car insurance for new drivers (under 25) is often more expensive because younger drivers are more risky. Not only due to their limited experience behind the wheel but also because they are more likely to take risks, drive under the influence, or check their phone while driving.
Insurance companies have the facts to back this up; in 2019, over 5,600 young people under the age of 25 died in car accidents, compared to 4,958 drivers between the ages of 45-54.1
What can you do about this? Opting for a separate policy might not be the most cost-effective choice. Often, a more affordable approach is to include your licensed or permitted teenage driver in your current auto insurance policy. By doing so, your policy's coverages and limits will also apply to your teen driver.
Once you get past 65, your insurance premiums rise again as your risk of being in an accident increases. This is due to a slowdown in reaction time, failing eyesight, and physical and mental fitness.
How Does Gender Affect Car Insurance Prices?
Do you know all those old jokes about women being bad drivers? As it turns out, those stereotypes aren't entirely accurate.
Men often face higher car insurance premiums than women due to the perception that they pose a greater risk to insurers.
Statistics from the Insurance Institute for Highway Safety (IIHS) reveal that, on average, men tend to drive more miles than women. Moreover, men are statistically more prone to engaging in risky driving behaviors such as speeding, driving under the influence of alcohol, and neglecting to wear safety belts. These factors contribute to the higher insurance costs for men.
In nearly every year from 1975 to 2019, men died in car crashes twice as much as females, according to an IIHS analysis of the U.S. Department of Transportation's Fatality Analysis Reporting System. In 2019, 71% of all motor vehicle crash deaths were males.3
Six states prohibit the use of gender as a pricing factor in auto insurance:
How Does Being Married or Single Influence Insurance Rates?
On average, if you're married, you might pay about $160 less each year for car insurance than someone single.4 It's not because married folks are better drivers, but it turns out that married couples often share driving duties more. This means fewer claims, and that's good for the insurance company because it means less risk.
It seems unfair that married folks often get lower car insurance rates, but many insurance companies say there's a reason for it. They think married couples drive more safely and have fewer accidents. Insurers see them as taking fewer risks on the road than unmarried people.
There are a few other reasons insurance companies believe in this:
How Does Your Job Influence Your Insurance Rate?
If you have a job that doesn't need a college degree or if you only finished high school, some companies might make you pay more for car insurance compared to someone with a white-collar job. Everyone's dealing with higher rates, but people with lower incomes are feeling the increase more.
If You're a Recent Immigrant
Recent immigrants can pay more if insurers don't accept their out-of-country driving experience. Or if they only have a foreign driving license.
On average, a lone accident will increase your rates by up to 38%, while a ticket may increase your rates from 22% to 30%. The age of your violations is essential as well. After three to five years, tickets and accidents won't impact your rate as much.6
Traffic Violations
The effect of speeding tickets and other violations on insurance costs: Getting caught for speeding or other traffic violations can significantly impact your insurance rates, leading to higher premiums.
Tips for maintaining a clean driving record:
Accidents
Being involved in at-fault accidents can have a substantial effect on your insurance premiums, resulting in increased costs.
Ways to lower rates after an accident: Drive defensively, adhere to traffic rules, and consider enrolling in safe driving courses to reduce accident risks and potentially lower insurance rates post-accident.
Regardless of fault, submitting a single insurance claim might cause your premium to rise. Yet, certain insurers provide accident forgiveness for your initial at-fault incident, preventing a rate hike. In the absence of such forgiveness, claims usually remain on your record for a period ranging from three to five years.
Claims History
How filing claims can influence future premiums: Frequently filing insurance claims can categorize you as a higher-risk driver, leading to high future premiums.
Considerations for deciding when to file a claim: Evaluate the situation carefully before filing a claim, as multiple claims may impact your future insurance rates. Only file claims when necessary to avoid potential premium increases.
1. Car Type and Model
The type and model of your car play a significant role in determining insurance costs. Factors such as the vehicle's market value, repair costs, and safety features contribute to the overall premium.
Insurance rates vary based on the type of vehicle. Family cars and certain hybrids may offer more budget-friendly insurance options.
The brand of vehicle also affects your auto insurance premium. According to Quadrant Information Services, Dodge has the highest car insurance costs on average, and Mazda has the lowest.7
2. Age of the Vehicle
The age of your car can influence insurance premiums. Generally, newer cars may have higher premiums due to their higher market value, while older cars might have lower premiums but could come with different considerations.
3. Safety Features
Cars equipped with advanced safety features may qualify for lower insurance premiums. Safety features such as airbags, anti-lock brakes, and collision avoidance systems can reduce the risk of injury or damage, making the vehicle less costly to insure.
Your location significantly affects your car insurance rates. Urban areas often have higher premiums due to increased traffic and greater risk of accidents, while rural areas may offer more affordable insurance options.
Some states have seen increases above 50 percent in the past year.8
In Colorado, car insurance premiums have seen a 52 percent rise since last July, driven by a surge in claims due to blizzards, tornadoes, and hailstorms. Similarly, in Florida, premiums have experienced an 88 percent increase as insurance companies work to recover losses incurred from damage claims related to hurricanes.8
Crime Rates
Urban and rural areas present distinct insurance considerations. Urban environments may have higher theft and accident rates, influencing premiums, whereas rural areas might see lower rates due to decreased risk.
Local crime rates play a crucial role in determining car insurance costs. Higher crime rates in your area, including theft and vandalism, can increase premiums.
To address insurance challenges in high-crime areas, consider installing anti-theft devices, parking in secure locations, and exploring insurance discounts or specialized coverage options designed to mitigate the impact of crime-related risks.
Insurance companies look at your credit because it helps them determine how likely you are to make claims. If your credit could be better, they might think you're more likely to use your insurance. They might charge higher rates to cover the expected costs.
Some states, including California, Hawaii, Massachusetts, Washington, and Michigan, don't allow insurance companies to use credit information to set car insurance rates.
Improving your credit score can have a positive impact on lowering your car insurance costs. That's something you can work on with OCHO! We pay your car insurance premium for you, and then you pay us back in small, manageable installments. We report your on-time payments to the Credit Bureau, which helps make your Credit Score healthier, paving the way for lower insurance rates in the future. Contact us today for more info.
Unsurprisingly, the extent of coverage you decide on affects how much you pay overall. Full-coverage car insurance can be twice as expensive as liability only.
Additional features like new car replacement or emergency roadside assistance can raise costs. It's your call to decide if the extra coverage benefits are worth the additional expense.
When choosing car insurance, the coverage you decide on can significantly impact your policy costs. Opting for higher limits may cost more but offers crucial protection in emergencies.
While it might be tempting to go for the minimum coverage to save money, it could leave you financially vulnerable if something unexpected happens.
Liability car insurance covers injuries and damage to other people's property if you are at fault in an accident.
Comprehensive and collision coverage: Comprehensive insurance protects against natural events like floods and hail, while collision insurance covers damage if you hit another vehicle or object.
Underinsured/uninsured motorist coverage: This helps if an uninsured driver hits you or the other driver doesn't have enough coverage.
Personal injury protection (PIP): PIP is mandatory in some states and optional in others. It pays for your medical bills and covers lost wages, regardless of who's at fault.
When shopping for car insurance, various discounts can help you save money. You may have to ask the company directly for these. They may not be applied automatically. Here's a quick guide:
When it comes to securing the best car insurance deal, shopping around for quotes from different insurers is crucial. Each insurance company assesses risk factors differently, leading to varying premium rates. By comparing quotes, you ensure you get the coverage you need at the most competitive price.
The internet has made comparing insurance rates easier than ever. Utilize online tools and resources to streamline your comparison process. Visit insurance company websites and reputable comparison websites to gather quotes efficiently. Remember that the first quote may not always be the best, and exploring various options allows you to make an informed decision.
Why Choose OCHO as Your Marketplace:
Consider using OCHO as your insurance marketplace to enhance your shopping experience. OCHO goes beyond other marketplaces, offering benefits such as:
Make OCHO your go-to marketplace for insurance, where affordability, flexibility, and comprehensive comparison tools come together to empower your insurance choices.
Navigating the complex world of car insurance can be challenging, with many factors influencing your premium. At OCHO, we aim to simplify this process, providing transparency and empowering you with valuable information to make informed choices.
As you've journeyed through this guide, you've uncovered the surprising factors that impact your car insurance rates. Some personal details and driving history are within your control, while others, such as your location or marital status, may present unique challenges.
We believe in simplifying the insurance process making it accessible and affordable. Whether you're a new driver, a seasoned professional, or someone looking for better rates, OCHO is here to assist you. Explore our marketplace, lower your down payment, and make the right choices for you and your family. Empower yourself with OCHO – where affordability meets comprehensive comparison tools.
References:
1https://www.autoinsurance.org/6-reasons-why-young-drivers-auto-insurance-costs-more/
2 https://www.progressive.com/answers/teen-driver-insurance/
3 https://www.forbes.com/advisor/car-insurance/rates-age-and-gender/
4 https://www.thezebra.com/auto-insurance/driver/status/married-vs-single-car-insurance/
5 https://www.caranddriver.com/car-insurance/a35824548/car-insurance-married-vs-single/
8 https://www.washingtonpost.com/business/2023/09/05/auto-insurance-claims-disasters/
9 https://www.insure.com/car-insurance/car-insurance-factors.html
10 https://www.forbes.com/advisor/car-insurance/discounts/