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Car insurance premiums can be impacted by driving history, other drivers on the policy, and more. Learn more about major factors affecting premium prices.
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Buying auto insurance is crucial to protect assets. But paying premiums can be a big hit to a checking account. To help make sure auto insurance doesn’t cost any more than it needs to, it’s a good idea to learn a little bit about how policies are priced.
In particular, here are four factors affecting auto insurance premiums that drivers should know about.
1. Driving history
A policyholder’s driving history has a huge impact on how much premiums cost. A driver with a history of accidents, speeding tickets, or DUIs is considered to be much more risky to insure than someone with a clean driving record.
Depending on the state, rates could increase anywhere from 26% to 74% following an at-fault accident. That could mean paying hundreds of dollars more per month and thousands of dollars more per year for auto insurance coverage.
2. Other drivers on the policy
An auto insurance policy is affected not only by the policyholder’s driving record, but also by who else is in the household and covered by the insurance.
For example, when a teen driver is added to an insurance policy, premiums can increase substantially. Teens are viewed as being very high risk to insure due to their lack of experience and the fact that teenagers aren’t exactly notorious for being careful, prudent motorists.
Adding another driver with an accident on their record or with any other red flags that increase the risk of a claim could also send premiums skyrocketing.
3. Vehicle type and features
The type of vehicle a policyholder has is going to play a part in determining how much insurance premiums should be as well.
Some cars are safer than others, due to features like collision avoidance technology or a higher number of airbags to reduce the risk of serious injury. By contrast, other cars may be viewed as riskier both because they have fewer safety features or simply because more people who drive them tend to get into accidents more often, so they have a higher risk rating.
Some cars are also more prone to theft than others. Since insurers may have a greater fear of a Porsche being stolen (and insurance having to pay for it) rather than a minivan or a Subaru wagon. This will be factored into the insurer’s calculations when it sets the price of coverage.
4. Location
Finally, location can matter more than a driver might think when it comes to insurance premiums.
Some locations present a higher risk of collisions than others due to the number of vehicles on the road, the design of roadways, and other factors. There are higher rates of insurance fraud in some areas than others as well. And there’s a greater chance of theft in certain locations.
Because of this, moving locations can result in a big premium increase or decrease. And, those who live in riskier areas can expect to pay more from the start.
Some of these factors are within the control of the policyholder, but others aren’t. Those buying insurance should do what they can to reduce the risks they have control over to reduce their premium costs. This could make a big difference in how big of a dent auto insurance puts in their monthly budget.
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