Useful Car Tips

Which Factors Affect Insurance?

October 09, 2019
Have you ever thought to yourself, “Why is my car insurance so expensive?” If you have, you’re probably wondering why that’s the case. Truth be told, there are many, many different factors insurance companies analyze when giving you a quote or generating your premium. Even neighbors living next to each other and driving the same car with the same insurance company may find themselves paying different rates. Individual agents don’t generate quotes themselves, instead, they input information and software takes care of the rest. The rates this software generates may seem arbitrary at first, but there is quite a lot going on behind the scenes. Regardless, too high of a quote or too expensive of a rate can be demotivating and financially draining. Therefore, it’s a good idea to learn about what exactly goes into calculating your insurance and essentially, how to pay less than you’re paying now, even if you’re happy with your current rate. It never hurts to save a little more!


The first factor is the most obvious one: try to be a safe driver. Insurance companies punish accidents, tickets, and other driving violations. Most large auto insurance companies in the US may even raise your premium if an accident was not your fault, so be extra careful! It’s as straightforward and obvious as it sounds, but trying your best to be a safe driver is one of the best ways to avoid paying high premiums. The fewer road violations you have, the lower you’ll be paying. Being a safe driver⁠—no tickets, no violations, no accidents⁠—for a certain period of time (as set by individual insurance companies) may also net you a safe driver discount, which will of course lower your premium even further. Mistakes happen and you’re not always able to control the circumstances on the road, though. In these cases, completing a defensive driving course is a great step to take.


A defensive driving course, also known as an accident prevention course, among other names, offers drivers a way to reduce points on their license and lower insurance rates. The specific parameters of these courses varies state by state and between countries. For example, if you’ve accrued 11 or more points on your license in New York State, completing a PIRP (defensive driving course) will subtract four points from this amount and will thus prevent you from losing your license. In other cases, it will also lower your insurance premium. Since all jurisdictions will have different parameters pertaining to completing a defensive driving course, research the benefits you could experience if you complete one in your area.


While ABS and DRL may look like alphabet soup at first, they’re actually both factors which can also affect your insurance rate. The first is ABS, or anti-lock brakes. As the name suggests, ABS prevents your wheels from locking during hard braking, as locked wheels can quickly lose traction and lead to a very dangerous situation. Most vehicles have ABS, but in the event that yours lacks this system, you may lose the associated discount. Similarly, DRLsor daytime running lightsare a safety feature which may provide you with a slight decrease in rate. DRLs aren’t designed to help you see the road but instead, help other drivers see you, and having this technology installed in your car can lead to another discount.


The last factor on our list may (or may not) come as a surprise to you: location. Your location can have some of the biggest effects on your premium. Even cities geographically separated by mere miles can have different premiums than their neighbors, even adjusting for other factors. Unfortunately, this is one factor that is out of the control of many, but one to consider when evaluating your current premium, as it may be one of the reasons why you’re paying more than you’d like to. Before moving to a new area, you may wish to get a quote from your insurance company for this new city or municipality. You may be surprised, and could even find yourself paying less than the $1,502 per year Americans spend on car insurance on average.


With a plethora of other bills for your mortgage or rent, utilities, cell phone, and even kids or college, taking active steps to lower your car insurance rate may provide you with some necessary financial relief. Even if you’re already happy with your car insurance premium and other monthly expenses, it never hurts to lower it even further and put some extra money in your savings account. No matter your goals, continue being a safe, smart driver and you’ll be well on your way to even more savings!
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