Does the price of your car affect your insurance rate?
Many variables play into calculating your auto insurance rates, including (1) the car's model, (2) your driving record, (3) your credit history, and (4) your zip code.
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UPDATED: Apr 29, 2022
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- The price of your car can have an impact on car insurance rates
- There are a lot of other factors that insurance companies consider when determining car insurance rates
- You can save money on insurance rates by shopping around and comparing quotes
Insurance companies take into account many factors when determining insurance rates for their customers. Your total premium is not just based on your driving record and the amount of coverage you purchase.
Find out if the price of your car will affect your insurance premium. Compare auto insurance quotes today using our free rate tool.
Does the price tag on my car affect my insurance premium?
The cost of your car weighs a lot when insurance companies consider your premium. One reason is because it costs more to replace an expensive car than it does to insure an economy car.
Another reason why an expensive car may have a higher rate is because they are statistically at higher risk for auto theft, especially if it is a sportier version.
Then again, the world of car insurance is very complex. In some cases, a newer, more expensive model could be cheaper to insure than an older model. Why? One thing insurance companies take into consideration is safety features.
As the automobile industry continues to excel, so do the safety ratings.
An insurance company is going to look very kindly on a newer vehicle that offers more protection in an accident.
Another reason why an older vehicle could cost more to insure is the cost of parts. The older a vehicle ages, the harder it gets to find replaceable parts, making the purchase price more expensive.
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What other factors do insurance companies consider when determining my premium?
Insurance companies also look at other areas that determine how likely you are to get into an accident. While it’s impossible to know what formula each insurance carrier uses to calculate risk, it is important to know what areas are commonly considered.
This can help you shop smarter and understand how life changes can affect your insurance rates. Here are some of the common areas that insurance companies consider:
Your Driving Record
Your driving record is one of the most important factors that insurance companies use when determining your rates. Your driving record says a lot about you as it gives an inside look at your driving history over a specified period of time.
It will tell the insurance company if you are a good driver with little to no problems or a reckless driver with a build up of the following:
- speeding tickets
Younger drivers who do not have much of a driving record will likely pay more for car insurance. One thing is for certain, the better your driving record, the lower of a risk you are and the lower your rates will be.
Gender roles play a significant role in calculating insurance rates. Statistics say that men are more likely to get DUI’s and are also more likely to be involved in a fatal accident. Generally, men pay more than women for car insurance.
However, as time goes on, rates will be calculated on individual driving history.
Your marital status also can play a small role. Those who are married tend to be more responsible and less likely to be involved in risky activities. The insurance company sees married couples as less of a risk.
This is why married couples tend to pay less for car insurance than those who are single.
Your Credit-Based Insurance Score
You may be wondering what your credit score has to do with your risk of getting in an accident. Those who have low credit scores tend to make poor judgments. The insurance company translates that into being a high-risk individual for making claims.
Insurance companies commonly look at:
- What debt you have
- Your payment history
- The length of your credit history
- Whether you’ve recently opened any new lines of credit
- What loans, credit cards, or other terms of financing you are currently paying on
Some insurance companies will not insure those with bad credit. Keeping a good credit score will help keep you from being labeled as a high-risk customer.
Your Location and Crime Rate
Where you live can either help you or hurt you insurance-wise. If you live in a busy city that has high crime rates, you are at more of a risk for theft than someone who lives out in the suburbs. The same ideology applies for being at greater risk for a car accident.
According to an article in the USA Today, those who live in Detroit pay a whopping 165 percent more than the national average for car insurance.
Another reason why location is important is because insurance companies want to know how much you drive. If you’re driving 40 miles on the highway to get to work every day, then you are at a higher risk of getting into an auto accident.
This could also have an impact on your insurance rates.
Not every insurance company uses all of these factors, and they may even consider other factors not listed.
How can I save money on auto insurance?
Saving money on car insurance is easy, but the savings are often overlooked if you aren’t educated about what’s available to you. Many car insurance companies offer discounts in a variety of areas, including:
- Bundling car insurance with home insurance policy
- Insuring more than one vehicle
- Installing anti-theft devices
- Choosing a hybrid vehicle
- Keeping a clean driving record
- Taking a defensive driver course
- Driving low miles throughout the year
- Being a part of the military
- Paying your premium in one lump sum
- Maintaining good grades for younger drivers
- Enrolling in paperless or automatic billing
Another way to save money is to compare multiple insurance quotes to see which one is best for you. An easy way to compare multiple quotes all at once is to use online comparison tools.
These online comparison tools eliminate the hassle of calling around or visiting multiple insurance agencies. Searching online is quick and easy and can be done from the comfort of your own home.
The number of factors that go into determining your car insurance goes well beyond the price of your car. So don’t let that necessarily sway you one way or another when you’re thinking about your ride.
Instead, compare insurance quotes and you will be well on your way to finding the perfect policy for you that doesn’t cost an arm and a leg. Compare today by entering your zip code in our rate tool below