What affects car insurance premiums?

You pay one amount for your car insurance, your best friend pays another, and your neighbor pays a different amount. What is this about? Most insurance companies consider several key factors when calculating how much you’ll end up paying for your car insurance and if you want the cheapest car insurance you will need to obtain a variety of car insurance quotes.

To clear things up, take a closer look at these factors that affect your car insurance premiums. Some of them also include extra tips to keep costs down.

Factors Affecting Car Insurance Rates

Your insurance policy and deductibles

When choosing your car insurance deductible and coverage, the details affect your monthly payment.

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Generally, choosing a higher deductible means having a lower monthly payment.
Choosing a lower deductible means having a higher monthly payment.

Any additional coverage you add will typically give you more insurance protection, depending on the claim, but will also increase your monthly costs.

One way to reduce insurance costs is to review your policy with your insurance agent and eliminate any coverage you may not need such as comprehensive coverage on an old vehicle, rental reimbursement, or Emergency Roadside Services.

what you drive

Car insurance providers often develop vehicle safety ratings by collecting extensive data from customer claims and analyzing industry safety reports. And they may offer discounts to auto insurance customers who drive safer vehicles. The opposite can be said for less safe vehicles.

Some insurers raise premiums for cars that may sustain damage or result in occupant injury or theft, and lower rates for those that score higher than normal on those measures
Driving vehicles rated highly for driver and passenger protection could translate into insurance savings.

So before visiting the dealer do some research on the car you want to buy. Does the vehicle that caught your eye have good safety ratings? Is this specific model often stolen? Knowing the answers to a few simple questions can go a long way toward keeping your rates low.

How often and how far do you drive

People who use their cars for long-distance and business trips typically pay more than those who drive less. The more miles you drive in a year, the greater the chance that you will be involved in a crash, regardless of how safe a driver you are.

To help offset how much you drive, consider joining a carpool or vanpool service, riding your bike, or using public transportation to get to work. Insurance rates may be lower if you cut back on your commute, so lowering your total annual driving mileage may lower your premiums.
Check with your insurance company for discounts for driving less. Usage-based car insurance like State Farm ® Drive Safe and Save may save you money when you drive less using your car’s telematics information.

Where do you live

In general, due to higher rates of vandalism, theft, and collisions, urban drivers pay more for car insurance than those who live in smaller towns or rural areas.

your driving record

Drivers who cause accidents generally pay more than those who have been accident-free for several years. If you have not had accidents for a long time, do not trust yourself. Please remain vigilant and maintain your good driving habits. If you are insured and have been accident-free for 3 years, you may qualify to save with an accident-free discount from State Farm.

And while you can’t rewrite your driving record, having an accident on your record can be an important reminder to always drive carefully and cautiously. Over time, the effect of past crashes on your premiums will lessen.

your credit history

Certain credit information can predict future insurance claims. Many insurance companies use credit history, as applicable, to help determine the cost of car insurance. Maintaining good credit can have a positive impact on the cost of your car insurance.

Your age, gender, and marital status

Crash rates are higher for drivers under the age of 25, especially single men. Insurance prices in most states reflect these differences. If you’re a student, you may qualify for a discount. Most car insurers provide discounts for student drivers who maintain good grades.

What are ways to help lower car insurance premiums?

Eliminating unnecessary coverage, increasing your deductible, or lowering coverage limits can help lower insurance costs. Your insurance agent can explain the pros and cons of these options to you.
In some states, teens can also take driver safety courses, like Steer Clear from State Farm, which could lower premiums. In general, it does not harm anyone and may even help.
You can also check with your insurance company to see if they have a telematics program, like Drive Safe & Save from State Farm. These usage-based car insurance programs track the miles you drive and use that information to help determine your premium. The less you drive, the more you can reduce your car insurance.
Other typical discounts include good student discounts; for children who don’t drive while in college; for people who insure multiple vehicles, install anti-theft devices, take preventive driving courses, and not have accidents while driving. See your local agent for a complete list of discounts.
Using a single insurance company for multiple policies can lower your overall costs. You can save money by combining the purchase of an auto policy with a homeowners policy, which is sometimes known as “bundling.”
Ask if your insurance company offers a discount for paying for the six-month term of the policy in advance. There may also be saved from automatic deduction from monthly payments, but check to see if this means you’ll incur a fee from your bank or credit card company.
Lastly, as always, it’s good to talk to your State Farm agent about what policies are best for you and your situation.