5 Factors That Impact Auto Insurance Premiums

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Things to Remember...
  • There are a variety of factors that impact auto insurance premiums
  • Driving history and vehicle type are both factors that you can control
  • Finding out about possible auto insurance discounts is also important

Many factors will influence what you will pay for auto insurance.

These factors are measured and subjected to statistical analysis in order to determine how much each factor will be considered in calculating your premium payments.

Each factor represents a specific risk for a certain segment of the population.

The equation is simple the greater the risk, the higher the premiums. Those drivers who are statistically at the lowest risk for an auto accident will pay the lowest premiums.

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1. Age of Driver


Of five factors that are considered important in determining risk, the first is the age of the driver.

Drivers under the age of 25 are considered to be in the highest risk category.

Parents should consider adding their teenager as a part-time rather than a full-time driver on the family auto policy.

Students who are away at school and may only get behind the wheel during vacation or school breaks are at a reduced risk for accidents and will be charged lower insurance premiums.

On the other hand, drivers between the ages of 50 and 65 generally have the best driving records. These drivers are often rewarded for their safe driving habits with sharply reduced premiums.

The oldest drivers, those over age 65, tend to be higher insurance risks. Statistical research shows that older adults often have slower reaction times and are more prone to judgment errors.

Older adults also have more health-related issues that can negatively affect their driving skills.

2. Driving History

After the age of a driver is considered, another important factor is driving history.

Motorists who consistently obey traffic laws avoid costly traffic citations and are rewarded with the lowest insurance rates.

Those with poor driving records and a variety of chargeable accidents will pay the highest premiums.

For drivers with DUI, DWI, or reckless driving convictions, car insurance may only be obtainable through the state assigned risk pool.

High-risk motorists will pay three or four times or more the normal rates for basic liability insurance coverage.

These penalty rates are likely to continue from three to five years. The good news is that insurance rates will eventually drop for those who stay out of trouble and avoid accidents.

3. Location


Where you live is another major risk factor for auto insurance companies.

Drivers who live in large congested areas are more likely to have accidents than those who live in rural, less populated sections of the country.

Urban areas also suffer higher crime rates, so there is a greater chance that an insured vehicle may be vandalized, damaged, or stolen.

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4. Vehicle Type

The type of vehicle you drive will also determine the amount you pay for car insurance.

Cars that are more often sought after by thieves will cost more to insure than regular family sedans and wagons.

As a rule of thumb, older vehicles will cost far less to insure than new ones. As the value of a car diminishes, so will the insurance premiums.

Owners of newer vehicles that are leased or that are financed will generally be required to carry higher coverage amounts and collision insurance to protect the bank’s investment.

Collision coverage is expensive but necessary to ensure that proper repairs will be made to a vehicle if it is damaged.

5. Auto Insurance Discounts


In order to remain competitive, most insurance providers will offer a variety of discounts to their policyholders that will reduce premiums.

The most common is a multi-policy discount. Having life, homeowners, renters, health, and accident or disability coverage with the same company that provides your auto insurance will usually produce significant discounts.

Other discounts include those offered for motorists who take safe driving courses, which usually results in a 10 to 15 percent savings on auto premiums.

Students who receive good grades in school are often eligible for car insurance discounts as are members of professional associations and national organizations such as the AARP.

Installing anti-theft devices on your vehicle can also qualify you for insurance discounts.

Being a safe driver and staying with the same insurance company for a number of years will qualify drivers for low premium rates offered by their insurance provider.

Other Factors and Statistics Influencing Auto Premium


A number of other factors contribute to high insurance rates and can be adjusted to effectively reduce rates for many consumers.

Increasing deductibles for your comprehensive and collision coverage can make a big difference in how much you pay for insurance.

Drivers should carefully review their auto insurance policies each year to avoid paying for unnecessary or duplicate coverage.

Of course, the best way to avoid high auto insurance costs is to minimize your own risk for a traffic ticket or accident by driving safely.

Obey the rules of the road. Never get behind the wheel of a motor vehicle if you have been drinking or under the influence of drugs.

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