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A Look at What Controls Insurance Costs

Car insurance rates involve many factors, many of which aren't even mentioned by your insurance agent. Being informed can help you find a reduced rate or at least be aware of the factors contributing to your total insurance policy fees. Most major auto insurers follow similar guidelines for determining costs, so all listed on your policy will be subject to the same guidelines.

While there are some factors that are not set in stone, many of the variables that contribute to policy fees are based on statistics that cannot be changed. For example, age and gender obviously aren't adjustable factors, but location and driving records are. The following points outline the standard guidelines that most major auto insurers use to determine your car insurance rates:

AGE: This is pretty basic; the older you are, the more your insurance costs decrease. Insurance companies figure that the more driving experience you have, the less likely you are to get involved in auto accidents. A teenager who just started driving will have much higher rates than a 32-year-old driver, especially if that older driver has a good driving record. This isn't something you can change, however, this is one of the few benefits of getting older!

Keep in mind that if you hold a family policy or if you have younger drivers on your policy, your rates will be reflected. This means you will have higher costs than if you were the sole driver on your policy. Conversely, if you are a younger driver who needs to cut costs, you could piggyback on your parents' policy to save some money, as it would cost less to be added to their policy than to pay your own premiums separately.

GENDER: Women typically have much lower car insurance rates than men, because statistics show them to be safer drivers.

LOCATION: Depending on the area in which you live, and the corresponding statistics for that region, your rates fluctuate. You could live in a high-cost area that shows more accidents, unsafe driving or accident-prone driving conditions. Locations with roads considered unsafe may be costlier than other places. Additionally, suburban areas tend to have lower auto insurance rates than urban or city dwellings. Local accident records, crime and higher medical costs for your area can contribute to a higher-than-average premium for your community. You can check online to compare rates or ask your auto insurance agent about the differences in these costs.

TYPE OF VEHICLE: It probably goes without saying, but having a high-end sports car will also put you on the high-end of car insurance rates. The difference between a minivan and a convertible sports coupe can be drastic. But there are other factors weighing in on how expensive a certain vehicle becomes. Items such as repair costs, safety records, cost or replacement value of the vehicle model, and tendency to be burglarized all affect your premium. If you are considering both a new car and new auto insurance, check on the statistics for your vehicle before buying. Choosing a car model that is high on the list of 'stolen vehicles' each year can make your premiums exorbitant. Quite often, this may be one of the most affordable and/or popular models on the market, but high insurance costs could negate the savings on the car value. You can compare insurance losses (i.e. how the insurers decide to rank the vehicles in terms of cost) for different vehicles at the Insurance Institute for Highway Safety. Access to their website is at www.hwysafety.org.

HISTORY: Keeping it clean pays off when referring to your driving record rather your car. The better your driving record, the lower your insurance costs will be. Any type of driving demerit, such as speeding tickets or traffic violations, will add points to your record and earn you higher premiums on your auto insurance. Past criminal violations will also count towards higher costs, especially ones involving vehicles- such as DUIs. This also counts for past accidents and claims- the less you have on your record, the better your chances for lower rates. The insurance company needs to see you as low-risk. A low-risk driver is likely to stay safe and not file many claims, thus keeping dollars in the insurer's pocket. Don't give them a reason to charge you more!

CHOOSING DEDUCTIBLES: A deductible is the amount that you agree to pay towards any claim you make on your insurance policy. There can be different deductibles for different types of coverage; a deductible on your comprehensive coverage may differ from your deductible for liability coverage. After you pay the deductible on a claim, the insurer covers the amount in excess of your deductible, up to any limit that may be set by your policy. For example, if you have a limit on your medical coverage of $100,000, and your deductible is $1,000, you must pay the one thousand dollars and the insurance company will pay the rest, up to $100,000.

The higher the deductible, the lower your monthly or total premium costs will be. This is because you agree to share more of the claim responsibility with the insurer. The less financial responsibility you agree to, the more your costs increase. A lower deductible will incur more costs for the insurance company, and they pass that along to you in the form of higher premiums.

For those of you with squeaky clean driving records, consider that you may be able to pay less with a higher deductible. The risk that you would be in an accident would be lower, based on your past driving history. Just be sure that you can afford out-of-pocket expenses for the deductible if you do get into an accident or filed a claim.

CREDIT RATING: Believe it or not, even insurance companies are allowed to check your credit score to determine car insurance rates. They are also not required to tell you unless you ask about it. The lower your credit score, the higher your insurance premiums will be. The insurers look at credit history as another way of establishing risk and they assess your ability to maintain a good credit score as a sign that you'll be more responsible on the road. The reasoning for this is controversial. Some insurers claim that a higher credit score positively correlates with less claims and accidents, and therefore costing them less in the long-run. There have been some states and consumer groups that have taken legal action against insurers, but currently, most major insurance companies will still rely on credit checks as a tool to measure premium costs.

CAREER: Insurance companies will analyze just about anything they can to accurately reduce their true risk for taking you as a client. This includes your occupational choice. Research shows that pilots, scientists and actors will pay less on average than executives, lawyers, and entrepreneurs. Insurers consider these careers less risky since they will spend less time in the car and on their cell phones. A sales executive, for example, is more likely to spend a lot of time in his/her car, driving around to make sales calls. The best defense to a "high-risk" occupation is to get an occupational group discount or affiliation discount with your company or an industry-related group.

Other types of questions you may be asked are how often and for what distance you operate your vehicle each week. Those that travel far distances to work or school may end up paying more than those who travel less. If you find that you are being penalized for circumstances beyond your control, try researching any group discounts and insurance programs you may already have to avoid duplicate coverage.