You may not always understand why your insurance keeps on creeping up. What insurers typically do is to analyze statistical data to determine the likelihood that specific categories of insured persons will make a claim. They will 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. You may feel that some of these factors seem unfair on the face of it, but it is what it is. That is the way insurance companies operate.
1. 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, if you live in a zip 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.
2. 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.
3. Your age
Your age is the most important factor that contributes heavily to soaring insurance premiums. Young male drivers under 25 years of age are considered to be more likely to get into accidents.
Statistics show this demographic are 200% more likely to get into an accident, and automobile crashes are the leading cause of death for this group. It should therefore not be a surprise that the largest premiums are paid by those 17-19 years old.
If you add a young driver to your policy, you can expect to see a sizeable increase in your premiums, in some cases by as much as 100 percent.
On the other hand, older people who are aged 50 to 74 can enjoy rates that are 5% to 15% lower than drivers aged thirty to fifty.
4. Your credit score
Most car insurance companies increasingly use credit score to help determine the likelihood of an insurance claim in future. People with 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.
5. Your incident rate
Your “incident rate” is another significant factor. And that is because even though there were no losses and you don’t make a claim, as long as your property was involved in an “incident”, you will be penalized in the form of higher insurance premiums.
All insurers require their customers to 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.
If you see your premium rise in this way, there’s not much you can do other than to switch to a different provider.
6. Your accident record
Many insurance companies increase premiums by as much as 50% for drivers that have been in car accidents, even when they were blameless in the incident. No matter how perfect your driving record and even if the other driver pays for all of the repairs, your premiums are likely to soar. If you’re living with a partner who also drives, their insurance is likely to rise as well, and the incident is likely to remain on your record for a certain period of time.
7. Claims history
Insurers will use your claim history to evaluate what your premiums should cost. The more claims you make, the riskier they assume you will be and the higher your premiums will be.
The claim you make just won’t count against you when you come to renew your policy the following year, it will also continue for many years to come. Most car insurance companies will look as far back as 3 – 5 years when assessing the level of risk you represent.
In addition, making numerous claims may eventually result in your insurance provider dropping you. If you have a history of making claims that are deemed unnecessary, this can affect your chances of getting alternative coverage.
8. Criminal Convictions
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.
9. 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 offenses 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 offense is no longer chargeable because some companies may neglect to remove it from your record.
10. 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. This is why it is a good idea to compare insurance rates and premiums when you’re in the market for a new car.
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.
11. Not installing an anti-theft device.
Car theft is a major risk factor, and not installing an anti-theft device increases the risk that your vehicle will get stolen and that you will be making a claim. Not installing this type of device in your car will skyrocket your insurance premium, because your car will be riskier to insure.
12. Remaining loyal to the same insurance provider.
Many people make the mistake of auto-renewing their car insurance due to some misplaced loyalty. It is one of the biggest mistakes you can make. Different insurance companies charge different rates for the same coverage, and only by shopping around will you find the cheapest rate that is available to you. Renewing with the same provider means you will be paying far more for insurance than you can get on the market.