What affects the cost of car insurance?
The cost of car insurance can change over time, and a policy that you thought was a bargain just a few years ago may be more expensive than it is today. We believe asking for a new car insurance quote at least every two years is a good habit to form.
Here are the most important factors that affect how much you are paying.
- Changes in your personal life: You should reassess your coverage and get a new quote if you’ve experienced significant life changes. Maybe you got married, divorced, started a family, or moved across the city or across the country! These changes can modify your “risk profile” and, therefore, how much you will pay for car insurance.
- Age of vehicle. Cars lose value as they get older and are often less expensive to repair or replace than newer cars. So, if your insured vehicle is several years old, your insurance costs may drop. Keep in mind that older models may be less high-tech or have fewer safety features than newer cars, making them more prone to accidents or more expensive to repair. And if your car is old enough to be considered classic, insurance companies may have special policies available, especially if the car is driven less often!
- Make modifications: Adding aftermarket parts may or may not affect coverage and premiums. First, if you don’t tell the insurance company about specific changes you’ve made to the vehicle, they won’t be covered in your policy and you won’t be able to include them in any claim. compensation in the future. Aesthetic modifications like new wheels or a body kit can only change slightly – if at all. But modifying the car to make it faster and more powerful can increase the risk of an accident — and the cost. Also, some insurance companies may consider some aftermarket parts less secure or reliable than the original, so check with your insurance company before making any changes. which change.
- Your driving history. One of the key factors insurance companies use to calculate the cost of your policy is the perceived risk you pose as a driver. If you have a history of traffic violations or accidents, your policy may be more expensive. On the other hand, if you have a clean driving record, you can get a discount.
- Changes in local law: State laws are always changing, affecting both the insurance company and the insured motorist. For example, a state could pass a law requiring all motorists to have a specific type of insurance, set a minimum level of liability coverage that must be provided, or raise taxes on premiums. . Any of these can (and often do) affect the cost of insurance for all motorists in that state.
- Driving time: Working from home shouldn’t directly affect your car insurance rates. However, some companies offer usage-based insurance plans that adjust premiums based on your driving level. The average U.S. car owner drives 12,000 miles per year, and if you don’t drive often due to retirement, a change in commute, or a work-from-home situation, tell your insurance provider. know. A reduced vehicle mileage report can reduce your car insurance by 5% or more.
- Parking location: When setting rates, insurance companies often consider where a vehicle is kept. That’s because cars are parked in higher crime areas or areas prone to damage or theft. If your car is parked in the driveway of your home, garage or gated parking lot at home or work, buying insurance may be considered less risky and you may be offered higher rates. lower price. On the other hand, if you park on the street, in a crime-ridden neighborhood, or in an area prone to flooding, damage, or theft, your premium will be higher.
- Improved credit history: Just as a change in your credit history can help you negotiate a better mortgage rate, it can also help you lower your car insurance premiums. However, some states have laws that forbid insurance companies from using credit history to determine insurance costs, so saving money because you have a better credit score is not a certainty.
- Economic change: Consider the cost of repairing or replacing a car. If it increases, it could lead to higher premiums, as insurance companies will pay more on claims. Competition in the insurance industry can also affect insurance costs. If multiple insurers offer coverage in a particular area, that could lead to more competitive (and hopefully lower) premiums for insured motorists.
By keeping these factors in mind, motorists can ensure that they are getting the best coverage at the most competitive prices.
It’s not all about the price!
It is important to note that price is not the only factor to consider when choosing an insurance company. You should also consider the company’s financial stability, the quality of customer service they are known for, and any additional perks or discounts offered.
If you’re happy with the level of service and coverage you’re getting from your current provider, stick with them. But it may be worth switching if you can find a policy with similar coverage for a lower price.
Insurance companies use different methods for calculating premiums, and policy quotes can vary significantly from company to company. By searching around, you can compare the monthly premiums and coverage options on offer and choose the one that best suits your needs and budget — this may have changed since then. from the last time you adjusted your policy.
Keep an eye out, though: some insurance companies offer loyalty discounts. However, according to insurance.com, loyalty only goes so far and the average price drop is less than 3%, while drivers typically reduce their car insurance by 19% by buying rates and switching carriers. It might make sense to investigate your options.
