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Factors affecting the rate of your car insurance: Complete guide


Are you thinking of buying or leasing a new car? United States law requires that you have insurance on your vehicle in case of an accident. If you injure another person for damaging your vehicle, your insurance will take care of the problem. In this way, the victim does not have to sue him in court for damages.

Insurance is a necessity, but many people do not know what they do when selecting their insurer or when negotiating premiums. Instead, they turn around and take the first premium that an insurer gives them.

Your insurer evaluates your risk profile to determine your premium. They take into account a variety of factors before giving an estimate. In most cases, you may not even realize that you are creating a risk profile during the telephone consultation.

When you receive the estimate, you may not realize that there is scope to negotiate the cost of the premium. Never accept the first estimate you get from the representative. This article gives you some tips and tricks that you can use to reduce your insurance rates. By examining the factors that affect your premiums, we can make adjustments to get a better deal.

Your age

The first question that any insurer will ask you during a budget consultation is your age. Your age is possibly the most important factor in estimating your insurance premium. Statistics show that most young drivers have an accident before age 21.

Insurers rely on statistics to calculate any premium, either in the auto industry or in the life insurance sector. Therefore, just because you feel that your driving is excellent does not mean that you can escape the scapegoat given by other drivers your age.

Insurers do not like to take risks, and if you are under 25, insurers see you as part of a high-risk demographic. As a result, you can expect to pay premiums by the nose. In some cases, drivers under 25 can pay double what a person over 25 pays for their premiums.

After your 25th birthday, it is vital that you call your insurance company and ask them to adjust your premium to fit your new demographic risk group. Waiting a few months to do this task could cost you hundreds of dollars in savings.

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Your driving record

During your consultation, the insurer will ask about your previous driving history. They can ask about penalties or arrests for past driving behaviors. Insurers will see your driving record as an indicator of future performance. If you have a poor track record behind the wheel, expect them to come back with a considerable premium.

The insurer takes into account parking fines, speeding violations and DUI when assessing it for a premium. If you have a history of speeding fines, that does not make you look like a driver who is caring on the road. Speeding is reckless behavior in the eyes of the insurer, and they will adjust their premium to cover the additional risk of insuring your vehicle.

Your credit score

Your credit score is probably the second main factor that insurers use to determine their premiums. The three major credit bureaus of America, Equifax, Experian and TransUnion, collect data each month from credit agencies such as insurance companies and banks. They manage this data about you and use it to compile your VantageScore or FICO credit score.

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When calculating your credit score, the offices take into account five factors that determine your credit risk profile.

  • The age of your credit lines. – How long have you been using credit and what is your oldest account?
  • How many lines of credit do you have? – Do you currently have many credit facilities?
  • The credit utilization rate in your accounts – Make sure you never use more than 30 percent of any credit card, as banks consider this to exceed your finances.
  • Your credit mix – The offices want to see that you have several accounts to show that you know how to manage your debts.
  • Your payment history – This is the most critical factor in determining your credit score. Do you pay your bills on time and in full every month?

Depending on how you manage your credit score, it could be 300 to 850. People with credit scores above the 800 mark receive the best premiums, while subprime credit scores below 580 can expect more premium costs. high.

You may wonder why your credit score has something to do with your insurance premium. Well, insurers see how you handle the credit as an indication of whether you will pay your premiums promptly.

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How long have you had a license?

This factor is similar to the age question. Not everyone gets a license when they turn 16. Some people stay away from obtaining a license for years after graduating from high school. It is for this reason that your insurer will want to know the date of the first issuance of your driver's license. If you have less than 7 years of driving experience, it is likely to result in a higher premium.

The more experience you have in the driver's seat, the lower your risk of an accident. That is another statistic that insurers trust when making a decision about what to charge. If you have had your license for 30 years, in the eyes of the insurer, you have a much lower risk than someone who obtained your license last month.

Your primary residence where you store the vehicle

During the consultation with the insurer, you will be asked where you park your car during the day and night. This question helps you assess the risk of your zip code. Crime is a major problem throughout the United States, as cities have higher crime rates than suburbs or rural areas. In high crime areas, there is a possibility that your car will be the victim of a crash and a car theft.

Cities also have higher traffic volumes, which creates more accidents on busy streets than on open roads. Therefore, when your insurer asks you this question, you are trying to determine if your car is at risk of theft, damage or accidents due to its location.

The best scenario for an insurer is that you live in a suburban community with low crime rates. You should store your car in a closed garage at night and use it only for private purposes, not for work. If you drive to the office, they will want to know if you leave your car on the street during the day or if you leave it in a secure parking lot.

This scenario is much better than someone who lives in a city infested with crime and parks the car on the street day and night.

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Your gender

Statistics also show that women are involved in fewer accidents than men. This fact comes from our genetic makeup. Men are victims of testosterone, and they are much more likely to get excited when driving at high speeds and driving recklessly. Women are sensible at the wheel and are more aware when they drive. As a result, statistics show that women have lower accident rates than men.

Therefore, if you are a man under 25 and have a sports car in the garage, you can expect the insurer to charge you a considerable premium. In some cases, women may receive premiums up to 25 percent lower than men, especially after 40 years. There are even some specialized insurance companies that only deal with women and refuse to insure men.

Your previous insurance history

Insurers also consider your previous insurance history when calculating your premium. Unless you are a new driver, insurance companies want to see you have continuous insurance coverage.

As a result, you will have to explain if you have any gap in your insurance history. A story like the one you made abroad and sold your car will feel better with them than telling you that you had a license suspended for one year.

Having no history means that you were driving without insurance, and you could face a premium that is more than $ 100 higher than someone who has 7 years of insurance history behind them.

The annual mileage you drive

Your insurer will also ask for your estimated annual mileage. If you don't drive a lot, you can expect to pay less for your premiums than someone who does 30,000 miles a year as a sales representative. Driving more means you have more time on the road.

While insurers can respect the additional experience you get behind the wheel, it also shows them that there is a better chance of being involved in an accident. If you play football and show up for each game and practice, there is a greater chance that you will suffer an injury.

The same goes for your insurance: the more time you spend on the road, the greater your chances of claiming on your policy.

Your marital status

Statistics show that single people are more likely to participate in risky driving behaviors that lead to an accident. Therefore, you can expect to pay more for your insurance premium if you are not married.

Insurers think that married couples have to worry about their family and are less inclined to take risks along the way. As a result, they reward you with lower premiums than individual premiums.

Your claim history with insurers

The insurer will also ask about your previous claims history to insurers. You should not lie about this during your consultation. All insurers share a database where they verify the answers they gave during the interview process. If they find you lying, they will refuse to insure you at any price.

As you can imagine, people who have a history of frequent claims in their policy are not ideal clients for insurance companies. Therefore, you can expect to increase both your premium and the excess rate charged when you make a claim.

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Your vehicle

The type of car or vehicle you drive also plays a role in the cost of your premium. During the interview, the insurer asks about the make and model of the car, as well as the year of production. If you register a muscle car or sports car, that generates warning signs. Insurers know that people who drive these types of vehicles are doing high speeds frequently. Therefore, you can expect a higher premium.

Your insurer will also ask for a list of vehicle engine modifications. If you start reciting a list of performance parts, you can expect the insurer to write you an expensive policy. The same goes for people who want to get coverage for their motorcycle. These are high risk vehicles for insurers, and they also come with high premiums.

Vehicle ownership

Our last factor on our list is vehicle ownership. If you are insuring your car and letting your children drive it all day, you will have to list them as additional drivers. Having your children in your policy will increase your premiums.

If you own your car directly, you also qualify for a lower premium than someone who is renting or financing your vehicle.

Ending – Negotiate your cousin

Many people take the first estimate that insurers send them as their only option. However, it may surprise you to know that you can ask them to adjust your budget. If you have a good driving record, excellent credit and are out of the high-risk demographics mentioned in this article, you have influence in the negotiations.

Insurance companies are like any other business; They are always looking for new business. If you are a model customer, then there is no reason why you want to reject the competition. If you receive a high estimate, compare prices with other insurers to get a better deal.

Asking your insurer to "sharpen your pencil" in your estimate can save you hundreds of dollars in premium costs during the year.


Disclaimer: The opinions expressed herein are only those of the author, not those of any bank or credit card issuer and have not been reviewed, approved or endorsed by any of these entities.

Disclaimer: The answers below are not provided or commissioned by the bank advertiser. The responses have not been reviewed, approved or supported by the bank advertiser. It is not the responsibility of the bank advertiser to ensure that all publications and / or questions are answered.

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