Needing Auto insurance is a fact of life when it comes to driving. In many places, it’s the law; if you’re caught driving without it, you could be fined, lose points against your license, or even have your license suspended.
Keeping your license and avoiding other penalties is a no-brainier — whether you’re a gear head driving miles every day or just a weekend road warrior that uses your car to go antiquing. It just makes sense to get insured and pay the monthly premium.
Your premium is the cost of keeping your car legally insured. But have you ever wondered what affects that cost? Let’s take a look at some of the factors that may impact the price you pay.
Your Credit Score
Some insurance companies may look at your past borrowing behavior to create what’s called an auto insurance credit score. It’s a three-digit number used to assess the risk they take on by insuring you.
Those companies that use this score base it off of what’s already in your consumer credit file. They may look at the account age, payment history, and utilization rate of any personal loan or line of credit in this file.
So that line of credit you took out to take pay an unexpected emergency repair? It might sway your premiums, provided your financial institution shares your account info with a reporting agency.
Just like your financial credit score, you want your auto insurance score to be as high as possible. The higher it is, the better premiums you might pay. For more details, find out how bad credit affects auto insurance premiums here.
Generally, a low score may result in higher premiums, but it’s not a given. There are many factors that impact your premiums, and how you perform in these other criteria may outweigh your bad score.
The type of vehicle you drive may play a part in the premiums you pay. Some simply cost more to insure than others. It has to do with the make and model, as well as the age, risk of theft, and even the type of driver behind the wheel.
If your insurer sees something that increases the chances you’ll cash in on your policy, they’ll probably increase your rates.
For example, an older Jaguar that you drive as if you’re formula racing may cost more to insure than a family-friendly mini van fresh off the assembly line. Not only is the Jaguar more likely to be in an accident by the way you drive it, but a repair would also require expensive, foreign parts.
The newer mini van is also more likely to have safety features like anti-theft devices or anti-lock brakes that may lower your premiums — which may be a good reason to upgrade to a nicer car.
Your Driving Record
Of course, your past behavior on the road is one of the biggest factors impacting your premiums. If you’ve been in multiple accidents, you’re probably going to pay higher rates than someone with a clean driving record.
Young drivers may also pay high premiums, even if you’ve never been in an accident before. This is because your driving record is simply too new to give insights into your behavior behind the wheel. Insurance companies may hedge their bets in case you turn out to be a reckless driver.
There are a lot of factors that may impact the cost of your insurance — and they’re not all intuitive. What’s more, these factors play off each other to create a unique price. So something that may increase the cost of one person’s premiums may not have an effect on yours — and vice versa!
It isn’t a perfect science. Shop around to find the right coverage and cost for you.