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7 reasons your rates drop

By Posted : 03/03/2015

Saving money on car insuranceThe only time most of us think about our car insurance is when there is bad news, like a ticket or an accident. When you’re young, single and incident-prone, rates only seem to go one way: up.

There is a flip side.  Tickets fall off your record, and so do accidents.  You’ll get older, you’ll move to a better neighborhood. All of these events will affect your car insurance rates – in a good way.

We compared rates among four insurers --Esurance, Progressive, Safeco and 21st Century – for Jeff, a hypothetical hipster in Seattle. Let's see what happens to insurance rates as life happens to Jeff.

You pay a bundle for car insurance

Jeff is 23, single, rents an apartment in Seattle, drives a paid-off 2011 Audi A3, commutes five days a week and puts about 12,000 miles a year on his car. He carries coverage levels of 50/100/50 liability and a $500 deductible on comprehensive and collision. If you're confused about what to buy, see use our auto insurance coverage calculator.

Jeff starts out with a spotty record that includes a recent accident with $20,000 in total claims.  

Insurers hate claims.

We’re showing a range of rates to demonstrate how differently insurance companies do the math, but in every case, the numbers can be scary.

Jeff’s starting annual car insurance quotes: $3,206 to $6,198

You keep your nose clean

Accidents, tickets and claims will jack up your rate, in most cases for at least a few years. "Minor violations will factor into your insurance rate for three years, while major violations can impact your premium for five to 10 years," says Tom Santamorena with Minto & Wilkie Insurance Agency in San Rafael, California.

But the more time that has passed since the infraction or claim, the better off you are.

A year later, with the accident still on his record but no new incidents, Jeff sees his rates drop significantly.  

Jeff, 23, with a year-old accident: $2,720 to $4,890

You have a birthday

While most of us think of 25 as the magic number, the truth is that as long as a young driver keeps a clean record, most companies will drop rates a little bit every year before then.

“It’s not age that reduces premiums, really,” says Insurance.com Managing Editor Des Toups. “It’s driving experience and a clean record that do it.”

Here’s what insurance quotes look like for Jeff as he gets older, assuming he keeps a clean record:

  • Age 23: $2,602 - $4,020
  • Age 24: $2,590 - $3,474
  • Age 25: $2,190 - $2,958

Jeff, 25 with a clean record: $2,190 to $2,958

You get married

When Jeff ties the knot, the cost of his car insurance after marriage will drop. Insurers love statistics, and data show that married drivers are involved in fewer accidents. Married people tend to buckle up more often and obey the rules of the road.

Some savings come as you combine policies and get multi-car insurance, but even if Jeff marries a spouse who doesn’t drive, his rates still drop dramatically. On average, it’s about a 10 percent drop.

Jeff, 25 and married: $1,876 to $2,430

You take the bus

According to the Bureau of Labor Statistics, the average worker changes jobs every 4.4 years.

A job switch will often change your commute, and that will change your premium. Jeff starts taking the bus to his new job and switches his primary use category from commuting to “pleasure use only.” His premium drops $100 with two insurers, but not the ones that are the least and most expensive.

On average, nationwide, giving up commuting drops premiums about 2 percent. Hardly impressive, but every dollar helps.

Jeff, 25, married and taking the bus: $1,876 to $2,430

You buy a house

Now that Jeff has found his soul mate, they are ready to buy a home. Insurers consider homeowners more stable than renters, so most will discount your rate, regardless of whether you insure your home with them or not.

The discount amount will vary; nationally, it averages about 1.6 percent.

More serious savings come from bundling your home and auto insurance, and the savings typically are reflected in your car insurance bill. Nationally, savings average about 8 percent.

Jeff, 25, married and a homeowner (but not bundling): $1,772 to $2,430

You move to a small town

Jeff and his wife decide to pull up stakes and move to Pullman, Washington, on the east side of the state. Fewer than 50,000 people call Pullman home, compared with more than 3 million in the Seattle area.

Outside of your own driving record, few things have more impact on car insurance than your ZIP code. Less population density typically means fewer accidents.

Jeff, 25, married homeowner in Pullman (not bundling): $1,234 to $2,310

You buy a new car

Jeff is trading in that sporty Audi for a Toyota Sienna.

The vehicle you drive is one of the biggest factors when computing your rate, but the rate has more to do with its claims record than how fast it can go. If a lot of younger drivers who have accidents drive the same model of car, then it will be assigned a rate that is more expensive than its peers.

Thus, some models driven by older people, like a Corvette, can be comparatively cheap to insure.

But a minivan pretty much checks all the right boxes.

Jeff, 25, married Pullman homeowner and minivan driver: $990 to $1,938

It doesn’t happen overnight, but it does happen

In just a few short years Jeff has watched his car insurance premium plummet by 70 percent, assuming he shopped around to find the best deal. At almost every stage, the insurance company offering the cheapest quote in one scenario was not the cheapest in the next.

“Big changes in your life usually mean big changes in your insurance,” Toups says. “It’s very rare for one company to offer the best deal in all circumstances.”

Even among four name-brand insurers, the average difference in quotes was 36 percent for every change in Jeff’s car insurance profile.

3 other times it pays to shop

You'll find substantially cheaper car insurance at other times in your life as well:

Your credit improves - If you currently have no credit or bad credit, a dramatic increase in your credit score can definitely lower your rate. Some states do not allow insurers to use credit scores to determine rates. "If your state does allow it, the savings can be big, as much as 10 to 15 percent," says Santamorena.

Your kid goes to college - If your kid heads off to a college that is at least 100 miles away and doesn't take a car with him, your rate should drop. "Some insurers discount your rate as much as 10 percent," says Brian Rauber with the Rauber Insurance Agency in Gladstone, Missouri.

You move to another state - State laws and different claims frequencies mean some cities will be much, much cheaper than others.  A bad driver in Portland, Maine, will probably pay less than a good driver in, say, Louisiana.


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