The Top 7 Factors That Affect Auto Insurance Rates (2024)

If you’re an experienced driver or know someone who’s been in a car accident, then you’re up to speed on how valuable car insurance can be.

While understanding that great auto insurance could save you from financial ruin is one thing, knowing what to consider while you shop for coverage is just as important.

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Shopping for Insurance

Although shopping for car insurance may not be the first thing you want to do in your spare time, by doing a little research beforehand, it can be a quick and rewarding experience.

Here are the top seven things to consider when it comes to auto insurance:

• Your budget
• The coverage you need
• The car you drive
• Your driving record
• Your credit rating
• The state you live in
• Whether you qualify for a discount
• Your budget

Of course, before you start shopping, it’s important to consider your budget and the amount of car insurance you can afford. Even if money’s not tight, you probably have other things like the kid’s college fund or retirement that you’re saving for.

Look at your overall budget and determine how much you can spend on insurance.

It’s important to remember, however, that if you don’t have enough car insurance you could be on the hook for thousands of dollars in damages.

So, in other words, it’s better to have a little too much coverage rather than not enough.

Car insurance rates vary depending on the driver and their circumstances, however, some groups of people should be prepared to pay more for their car insurance.

For example, if you’re a teenage driver, then you’ll need to budget for higher insurance premiums than any other age group.

According to the National Highway Traffic Safety Administration, teen drivers are three times more likely to be involved in a fatal car crash than other motorists are. As a result, insurance companies charge them more, as a means to offset their potential costs.

Even if you’re an adult, but haven’t been driving for long, then you’ll also pay higher premiums.

If your budget is tight, then you may want to consider agreeing to a higher deductible, so that your premiums are less.

The deductible is the amount of money you’re required to pay towards an insurance claim. If your deductible is $200 then you’ll have to pay $200 towards the repairs when you make a claim.

The higher the deductible is the less an insurance company has to pay towards the overall costs. Just make sure you can come up with the money for the deductible if you need to.

If you can swing it, pay your insurance premiums bi-annually or annually rather than monthly. Most insurance companies charge customers a little more to pay monthly.

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The Coverage You Need

Once you’ve reviewed your budget and have an idea of how much money you can spend, then it’s time to consider what kind of coverage you need.

Although it may take a few minutes to do so, having the right insurance could save you a ton of money in the long run and will set your mind at ease.

Nearly every state requires drivers to have liability insurance for your car, which pays for the damages another person or property incurs in an accident you cause.

Liability insurance will also help pay for your legal defense and court costs if you need it.

In addition to liability insurance, there are several other types of coverage to consider. Collision insurance will pay for the repairs your car needs from an accident you cause, and comprehensive insurance will cover damages that don’t involve another motorist.

If you’re looking for even more coverage then you may want to consider buying Personal Injury Protection (PIP) insurance.

This type of insurance covers medical costs from an accident that aren’t covered by a person’s health insurance, regardless of who was at fault.

In addition, some PIP policies will help cover lost wages and other expenses a person might have because of a serious accident.

Of course, the more coverage you buy the higher your premiums will be, but having the right amount of insurance to protect you and your family is extremely important.

While you’re considering how much insurance you actually need, ask yourself several questions.

Do you drive a lot each day and for long distances or drive frequently in heavy traffic? Do you live in a highly populated area? Or in a region prone to extreme weather?

Organizations like the National Association of Insurance Commissioners provide consumers with information about auto insurance and the various types of coverage.

The Car You Drive

Another key factor to consider is the type of car you drive. If you drive an expensive vehicle that will cost more to repair then an insurance company will charge you more.

In addition, flashy and luxurious cars have a greater chance of being stolen, which is another reason why insuring them will cost more.

Insurance companies also review statistics to see which cars do not have good safety ratings and are involved in more accidents as a result.

If providers believe your vehicle is less safe than other models, then your premiums will be higher.

Your Driving Record

Your driving record will also play a big factor in your search for auto insurance. If you’re a responsible driver who hasn’t caused any accidents and hasn’t received any traffic tickets, then finding affordable car insurance will be a much easier task.

If you’ve been responsible for a car crash, however, and have received a speeding ticket or two then insurance providers will charge you much more.

In fact, people who have extremely bad driving records may have trouble finding a provider to insure their car.

Drivers who are considered high-risk may have to purchase a more expensive, non-standard policy.

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Your Credit Rating

While your credit rating may not indicate whether you’re a good driver, it does show insurance companies if you pay your bills on time.

If you’ve been late paying your premiums in the past, then providers will charge you more.

 If you’ve had your car insurance cancelled in the past due to non-payment, you may have trouble finding coverage altogether.

Even if you’ve never had trouble making your car insurance payments, but have fallen behind with your mortgage or credit card bills for example, then providers may see you as a risk to insure.

If you have a good credit rating, on the other hand, then insurance providers can trust that you’ll pay your premiums on time and will charge you less.

The State You Live In

Where and how often you drive affects the amount of insurance you need but so does the state you live in.

Not only does the minimum requirement for liability insurance vary from state-to-state, but also some jurisdictions require drivers to purchase other policies like PIP insurance.

Insurance providers are required by law to tell customers what the minimum requirements are. You can also find out by contacting your state government. The department that oversees car insurance in your region depends on what state you live in.

For example, in North Dakota, it is the Insurance Department.

How much taxes insurance companies are required to pay in a certain state will also affect the price of your premiums.

If you live in a state that’s prone to extreme weather, like tornadoes or hurricanes, then you also may have to pay more than someone who doesn’t.

In addition, if you live in a state that has poor roads and has many car accidents annually, then insurance providers may charge higher prices.

Ask For a Discount

Last but not least, one of the more important factors to consider is whether you qualify for a discount.

If you have a good driving record and have been a reliable customer, then insurance companies may offer you a discount to attract or keep your business.

If one provider offers you a discount, then be sure to mention it to their competitors to see if they’ll match it.

If you’re a full-time student with good grades you may also qualify for a discount.

Many companies offer them to students who have a B average or higher overall. Many providers also offer discounts to veterans as a way to thank them for their service.

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