Non-Driving Factors That Determine Your Car Insurance Rates

factors that determine car insurance ratesWhen signing up for a new auto insurance policy, most people consider all of the mistakes they’ve made on the road and how these mistakes affect their cost of car insurance. The two concerns that usually crop up are how many accidents the driver has been in and whether they have been ticketed for speeding.

Other factors that most feel impacts their coverage costs include the type of coverage being purchased, the amount of the deductible, and the type of car being insured. There’s no doubt that these factors indeed impact the cost of car insurance. But many don’t know that there is also a long list of non-driving factors that determine car insurance rates.

Non-Driving Factors That Determine Car Insurance Rates

The confusion over what contributes to the cost of auto insurance has left some consumers feeling like they’ve been treated unfairly by their auto insurers, according to a recent survey conducted by the Consumer Federation of America (CFA).

The national survey of more than 1,000 consumers revealed that many people oppose their insurers’ use of a number of non-driving related factors — those outside of driving behaviors, type of car insured and coverage types desired.

The CFA has said most major insurers not only use non-driving related factors, but allow them to increase premiums for low- and moderate-income drivers by as much as 100 percent.

But what are these factors and how are they being used to set premium costs?

Non-Driving Factors Affecting Cost of Car Insurance

The study listed a number of non-driving related factors that determine car insurance rates. Here is a list of some that are likely to impact your cost of car insurance:

  • Gender: Often times, women are said to pay more for their coverage than men.
  • Credit score: The higher your credit score, the more you are likely to pay in insurance.
  • Level of education: The higher your level of education completed, the more likely you are to receive a lower quote.
  • Occupation: Professional occupations (teachers, lawyers, etc.) are typically favored by insurance companies with lower premiums.
  • Lack of current auto insurance: If you have not maintained continuous coverage, you may be penalized with a higher auto insurance rate.
  • City of residence: Individuals living in areas with higher crime rates often pay higher insurance rates.
  • Marital status: Some insurers believe drivers who are in a romantic relationship are safer than those who are single and, as a result, are charged lower rates.
  • Homeownership: If you are a homeowner and not a renter, you are likely to pay less for your auto insurance.

The CFA not only examined the concerns of Americans impacted by non-driving factors who shop for car insurance, but also conducted its own analysis of auto insurance premiums by using the websites of the five largest auto insurers to price minimum liability coverage for a 35-year old woman with a good driving record in five different cities.

The federation then altered the woman’s characteristics, including marital status, educational levels, occupation, homeownership and other attributes.

The highest premiums found in the study were revealed when the sample woman was single, a renter and her highest level of education was high school. Altering the characteristics otherwise resulted in the cost of car insurance coverage lowering by as much as 68 percent.

The general consensus is that lower-income individuals are penalized with higher car insurance rates because insurers are using factors often associated with their circumstances (less education, lower credit score, lack of homeownership, etc.) to set their auto insurance premiums.

This lower credit score issue, in particular, is one that has faced criticism in the past. Earlier this year, two representatives in Michigan sought to have the use credit scores banned when setting auto insurance rates because of the disadvantage they said it presents to individuals hit hard by the recession.

Respondents in the CFA study seemed to agree with this sentiment. Rather than looking at these driver characteristics when determining rates, the CFA found that consumers preferred companies use four simple factors: traffic accidents, moving violations, number of years with a license and miles driven.

4 Tips to Follow When You Shop For Car Insurance

If auto insurance companies are, in fact, using a long list of non-driving factors to set your auto insurance rates then how can you can save money on auto insurance with a handful of preliminary steps before signing on the dotted line.

1. Search for Auto Insurance Discounts

One important step to take when searching for coverage is to look for auto insurance discounts. Many companies reward customers with a discount just for purchasing coverage online. But that’s not the only way to earn discounts.

You could also consider the pay-as-you-drive (PAYD) option, which rewards you for driving your car less. Or you could consider bundling with your home insurance policy, something most companies advise their customers to do to save money on the cost of car insurance.

2. Adjust Your Deductible

Another popular way to lower your auto insurance premiums is to increase your deductible if you carry comprehensive or collision insurance. The deductible is the amount you are required to pay before your auto insurance company will settle a claim. The average deductible is set at $500, so if you increase yours to $1,000 or higher, you will see your premium drop.

But before taking this route, always make certain that you can have the deductible amount sitting around in a reserve savings account so that you can pay it promptly if you are involved in an accident.

3. Take a Defensive Driving Course

Most auto insurance companies want to know that their drivers are safe on the roads. What better way to prove it than to take a defensive driving course? There are a number of courses available online in each state and if you take one, your company may reward you with a handsome discount.

Before diving in, confirm that your insurer with honor the course since they do cost money to take.

4. Shop Around Before the End of Term

Did you know that some companies reward individuals who walk away from their current insurer prior to the end of their current term? If you aren’t happy with the rate you’re being charged, start searching for coverage with another company right now. You might be surprised by the discount you’re offered for walking away early.

Over the years, a number of organizations have fought the concept of charging more for car insurance coverage based on non-driving factors. But this has not impacted companies’ use of these factors when setting coverage amounts.

This means, it’s up to you to find ways to lower the cost of car insurance, including increasing your credit score, maintaining continuous coverage whenever possible and considering the auto insurance discounts and tips listed above. While you may not have control over all non-driving factors affecting your car insurance rates, the factors you can control may save you hundreds each year.