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Cheap car insurance: Factors that affect your car insurance rates

By Michele Lerner Posted : 09/25/2013

car, calculator and moneyIf you've compared car insurance quotes lately, you're aware that different auto insurance companies will offer you various car insurance quotes even for the same exact policy. While insurance companies typically use the same factors to determine the premium you pay, they weigh those factors differently. Some of the factors that influence your car insurance costs are things you can't change, but others are within your control.

10 factors that impact your car insurance rates

One of the best ways to control how much you'll pay for car insurance is by adjusting the coverage you purchase and your deductible, says Karen VanCleave, a pricing actuary and manager at American Family Insurance in Madison, Wis.

"If you can handle it, a higher deductible such as $1,000, will lower your premiums," says VanCleave. "Lower liability limits also lower your costs, but be careful with this because it also leaves you with less coverage."

After you've determined your coverage limits and your deductible, an insurance company will base your insurance premiums, in part, on the following factors:

1. Type of car. VanCleave says insurance costs are higher for newer model vehicles and luxury cars such as a Porsche that would be expensive to repair or replace.

"Newer models have higher collision and comprehensive premiums because they're more costly to replace than a used car," she says.

Before you buy your next car you can ask an insurance company about the rates for various models or ages of cars you're considering.

2. Credit information "Most insurance companies use credit-based insurance scores from the credit reporting bureaus," says VanCleave. "The score is used to determine your payment history and also your propensity to make a claim, so if you have a low score your insurance rates will be higher."

Pay your bills on time and reduce your debt to improve your credit score and lower your car insurance premiums. Note that in a few states, including California and Massachusetts, insurers are prohibited by law from using credit as a rating factor.

3. How much you drive. Car insurance companies ask you to estimate how much you drive each year when setting your auto insurance rates.  

"The less you drive, the lower your chances of having an accident, so your insurance premiums are lower if you drive less than 7,500 miles a year compared to someone who commutes two hours each way to work," says VanCleave.

4. Driving record. Moving violations and accidents will cause your insurance premiums to rise. VanCleave says most insurance companies look back for three to five years for tickets, car insurance claims and your history of accidents.

5. Age. Younger drivers with less experience typically have the most expensive car insurance premiums because they have more accidents than older, more experienced drivers, says VanCleave.

6. Gender. Men generally pay more for car insurance than women because women have fewer accidents and claims, says VanCleave.

7. Marital status. "Married people pay lower premiums than single people because insurance companies have studied statistics and find that more claims are made by single people," says VanCleave.

8. Your location. VanCleave says insurance companies factor in geographical information about population density, number of thefts, road conditions and speed limits for the area where you keep your car, which is where they assume it's primarily driven. Typically your auto insurance costs are higher in an urban area where you're more likely to have an accident or have your car stolen.

9. Driving experience. While younger drivers already have higher premiums because of their lack of experience and their age, older drivers who are newly licensed sometimes also pay higher car insurance costs, says VanCleave.

10. Business use of your car. Depending on how much you use your car for work and whether you or your company owns it, you may need commercial car insurance instead of personal insurance, says Van Cleave.

"Generally, even if you don't need commercial car insurance, you'll pay more for a car you use for work all day as well as on the weekends simply because you're using it more," says VanCleave.

Ask about discounts when comparing car insurance quotes

You can lower your premiums if you qualify for discounts offered by most insurers for the following:

  • Anti-theft devices
  • Maintaining a minimum  3.0 grade-point average for students
  • Multiple cars on one policy
  • Bundling your car insurance with your home or renter's insurance policy
  • Online billing
  • Driving a hybrid or electric car
  • Certain occupations such as firefighters and engineers

"Every insurance company's rating plan will be different, so it pays to shop around for car insurance," says VanCleave. "Each company has something different for different people and there are so many variables that go into pricing car insurance that you can get a range of insurance rates for the exact same car and driver."

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