You may not understand why insurance rates go up. What insurers typically do is look at statistical information and other data to determine the likelihood that specific categories of insured persons will make a claim, and then impose higher rates on those with greater perceived risk factors.
Understanding these risk factors can make it easier for you to reduce your rates by changing those that are within your control. Some of these factors may seem unfair on the face of it, but this is the way insurance companies operate.
Top Ten Factors
Where you keep your car
Insurance policies are priced based on the likelihood that you will make a claim. No matter how perfect your driving record is, if you live in a zip code or post code that is associated with high car theft, criminal damage or accidents, your auto insurance policy will cost more because your vehicle will be seen as being susceptible to these incidents.
Your job title
Your job title and the nature of your occupation is one of the factors that can make a substantial difference in what you pay for your insurance premiums. In fact, what you do for a living can make cause premiums to vary by as much as 25% despite the professions having no direct impact on a driver’s experience or skill.
For example, a window cleaner can receive a quote that is more than five times higher than an accountant that drives the same car and lives in the same zip code or post code.
The most important factor that contributes heavily to sky high insurance premiums is your age. Drivers under 25 years of age are considered to be more likely to get into accidents; consequently they have higher insurance costs. Younger, less experienced drivers have always borne the brunt of higher premiums because of their risk profile, so it will not be a surprise to many that the largest premiums are paid by those 17-19 years old.
If you add young drivers to your policy, you can see a hefty increase in your premiums by as much as fifty to a hundred percent. This is because young male drivers, drivers represent a high risk-factor since statistics show they are 200% more likely to get into an accident, and automobile crashes are the leading cause of death for this group due to their lack of driving experience and immaturity.
Conversely, older people have lower insurance rates. Generally, those who are aged 50 to 74 can enjoy rates that are 5% to 15% lower than drivers aged thirty to fifty.
Your credit score
Most car insurance companies use credit score to help determine the likelihood of an insurance claim in future. People who have poor credit are a significantly higher risk for insurance companies than their higher credit scoring counterparts. Statistical analysis shows that people with higher credit scores and long-established credit history without late payments get into fewer accidents and cost insurance companies less than people with lower credit scores.
Your incident rate
Your “incident rate” is another of those factors that you should watch, because even though there may have been no losses whatsoever and you don’t make a claim, as long as your car was involved, you will be penalized for it in the form of higher insurance premiums. All insurers will state in their terms and conditions that their customers must report incidents regardless of whether they make a claim.
For example, if you left your car door open whilst you were shopping and something was stolen, that is a reportable incident, and your insurance company will add you to a specific category. Statistics show that thousands of motorists have been penalized in the form of higher insurance premiums for incidents that had nothing to do with them.
If you see your premium rise in this way, there is very little recourse available other than to switch to a different insurance provider that would not hike premiums in these cases.
Your accident record
Many insurance companies increase the underlying insurance premium by as much as 50% for drivers that have been in car accidents, even though the accident was not their fault. No matter how long you’ve had a perfect driving record and even the other driver pays for all of the repairs, you are likely to see your insurance premium soar.
If you are living with a partner who also drives, their insurance is likely to rise as well. This incident is likely to remain on your record for a certain period of time. For some companies, cases in which “the other driver” was cited for causing the accident may be excluded from your record, but it is important to find out directly from your insurance company, because they may or may not have accurately recorded the event.
If the police were involved, be sure that it was accurately documented as the police can easily get the facts mixed up in cases like this. Do not sign without reading the police report. If the other driver was at fault due to “failure to yield”, insist on the investigating officer stating that fact in writing.
Insurers will use your claim history to assess how much you could cost them, and the more claims you make, the riskier they assume you will be and the higher your premiums will be. What is more, the claim you make just won’t count against you when you come to renew your policy the following year, it will continue for many years to come. According to industry experts, most car insurance companies will look as far back as five years when they are offering you a new insurance policy.
In addition, you should be aware that making numerous may eventually result in your insurance provider dropping you. If you have a history of making numerous claims that are deemed unnecessary, your chances of getting coverage from another carrier can be affected. If you somehow got insurance, you will be charged astronomically high rates.
Any kind of conviction at all, not just for driving offences, can make it extremely difficult to get auto insurance. Even if you’re able to find an insurer, the premiums will be sky high. Apparently, criminally convicted drivers are statistically more likely to be involved in accidents and make insurance claims, and therefore are sometimes considered too high-risk to insure.
Citations and speeding tickets
Every insurance company looks at public records and your driving record is taken into consideration. Experience has proven that public records provide powerful insights into your projected cost to the company. Speeding tickets, citations and other driving infractions will increase your premiums significantly.
If you have had any type of traffic offences on your driving record, be sure to find out how long it is supposed to count against you, and double check that your record has been purged when the offence is no longer chargeable because some companies may neglect to remove it from your record.
The type of car you drive
Insurance companies group vehicles into different categories, and the category in which your car falls into will have an impact on your insurance costs. There are a wide range of other factors that determine the insurance rate of a particular make and model.
For example, cars that have high safety ratings cost less to insure, as are larger vehicles which are seen as safer in an accident. On the other hand, there are models that insurance companies see as more ‘theft-friendly’ based on car theft statistics and thus, have higher premiums.
Here are some of the factors that insurance companies generally take into account when categorizing your car and model:
- How powerful your car’s engine is.
- How likely your car is to be stolen.
- How secure your vehicle is deemed to be.
- How many times the brand has been involved in accidents.
- The cost and availability of the car’s spare parts.
- How likely the brand is to be involved in accidents.
- What type of injuries the car causes when involved in collisions.