One of the most common questions we get is "Why do I pay that amount when my friend only pays $x". And there are many reasons why, but just like anything else that we buy, insurance rates are only locked in for the policy period. For auto insurance that only means typically 6 or 12 months.
With advances in technology, insurance companies are able to predict the amount of risk they take on when providing you with insurance. The higher the risk, the more you will pay. Along those same lines, as your life changes so will your insurance. here are 7 factors that can increase or decrease the amount you pay for car insurance.
1. Changing Jobs
Most people don't think about their car insurance when changing jobs, but there are two key factors that can affect your premiums.
- The distance of your commute to work - Typically, higher mileage work commutes demand higher premiums. The more you drive, the more risk there is that something will happen. Along the same lines, the less you drive, the less risk and you may qualify for a short commute discount. With most companies, if you travel 5 miles or less one way to work and/or drive less than 7,500 miles per year you can save money on your auto insurance.
- Business Use - Personal auto policies don't cover business use unless you have your policy endorsed to do so. So if your job requires you to use your personal vehicle for business, you will see a change in premium due to the higher risk associated with the liability coverage. Some employer's may also require a higher limit.
2. Change of Address
Insurance companies track every piece of information when they payout for a claim, with auto insurance that includes accidents and thefts. One piece of that information is the city and even zip code. If you live in a city that has a higher claims payout, or even zip code you will experience higher insurance premiums. On the flip side, if you move from a higher risk zip-code to one where not much happens, you will experience lower insurance.
Other things considered is if the car is parked in a garage or on the street can make a difference.
3. Changing Credit Score
Not only does your credit score determine your worthiness for a loan and your interest rate, but it also makes a difference on your car insurance premiums. The insurance industry has developed an insurance score that has a credit base to it but also takes other lifestyle considerations into it, so the credit score you see from the reporting agencies doesn't tell the whole story.
It makes sense to contact an independent agent to find the best company for you because each company factors the credit score differently. Some will give you up to a 50% discount while others are only as little as 10%.
This has been the biggest complaint the past several years about the industry, but there is more than enough data to show if someone has trouble paying other bills, then they may also have trouble paying their insurance premiums and if your hard-pressed for cash one will be more likely to file insurance claims for items that shouldn't be filed. Even if the company doesn't pay out a claim, it still costs them approximately $400 just to respond and investigate the claim. These types of claims bog down the response time and drive up the cost for the rest of us.
Typically, once your policy is in effect, the insurers only spot check the credit every couple of years. If your credit has improved, call your agent and give them permission to check it early, it may improve your premiums.
4. Teenage Drivers
The right of passage also known as a driver's license can seriously affect your insurance premiums. Teenage drivers are considered high risk because of their lack of experience. Until they spend the time behind the wheel and gain valuable experience on how to react to the road, the rates are quite high. An independent agent is your most valuable asset when adding a young driver to your policy for many reasons:
- Some insurance companies don't want to insure teenage drivers and your independent agent will have options
- Good student discounts mean different discounts at different companies so your independent agent can educate you on the differences between companies
- Some companies offer special coverages you may want to consider when adding a young driver such as accident forgiveness, violation forgiveness, not to mention higher liability limits and umbrella coverage to protect your assets.
5. Marriage or Divorce
Getting married can be an exciting time and also means lower car insurance premiums! Younger couples (around 25 years old) getting married will notice the biggest difference in their auto insurance premiums. On top of that, you are now able to combine your stuff to take advantage of multi-car discounts and if buying a home qualify together for auto - home discounts.
Just because you are married, doesn't mean you are covered to drive each other's cars. An independent agent can help guide you to the right coverages for your new life situations.
Conversely, if a married couple separates and lives under different roofs, the two should immediately get separate policies. Generally, the joint policy won't cover the spouse living off-premises.
6. Accidents, Tickets, and other Events
Being responsible for an accident, receiving a moving violation, or filing a damage claim represents the major events that can trigger automatic increases in your car insurance premiums.
How they affect your premium depends on the type of event, the area you live in, the company you are insured with, and history with the company. Typically the surcharge for each event is a % of your premium that will increase. It doesn't matter how much the company pays out, the surcharge is the same for everyone. Most companies surcharge for the first 3 years, but will not give you the best rates till 5 years of having a clean record.
Once one of these events takes place, there is no way to avoid the change in premium unless you have a policy that has accident forgiveness, violation forgiveness prior to the event. An easy strategy you can use to avoid these situations is to increase your deductible to $1000 to help lower the premium you pay and keep you from filing minor claims that cause you to spend more.
7. Retirement or Death
Retirement generally means you will be paying lower car insurance. Reflecting back up to the job change, since you are no longer commuting you now get the pleasure use a discount. This is not automatic so make sure you contact your independent insurance agent so they can make the change for you.
In the event, someone passes away, even if you're the executor of the estate, you need to contact the company to see who is covered under the policy before anyone drives the car. You are not automatically covered, you will need to be added to the policy.
Today the insurance industry factors just about any piece of information they can to help determine a true price for each one of us. There are more than 130 items factored into the pricing for our policies, so It pays to find a good independent agent to help plan a custom protection program for you and your family and guide you to the right insurance company for your stage of life.
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