4 Key Factors That Dictate Your Car Insurance Rates

Auto insurers calculate their policyholders' rates based on a presumed level of risk of future claims. A driver who is likely to file a claim, or cause an accident where another party will file a claim, is insured with higher premiums. Conversely, a "low risk" motorist usually enjoys lower premiums. But what factors cause one driver to be placed in a higher risk category than another? More importantly, can you influence these factors?

The answer to the second question is yes. Even though each insurance company uses their own formula to decide what type of driver you are, the factors that decide the formula are fully in your control. Regarding the first question, the following will reveal the 4 core ingredients.

#1 - Make, Model, And Year Of Your Vehicle

Some vehicles are more expensive to insure than others. This can be due to a number of factors, including the cost of replacing parts, the vehicle's ability to protect passengers, its age, and market value.

If the costs for your car parts is expensive it may cost you thousands of bucks to do the repairs; expect your insurer to charge higher rates. If your vehicle offers scant protection for passengers, an accident might pose higher medical expenses; as a result, your premiums will likely be higher. If your car is an older model and its market value is relatively low, it will be less expensive to replace; your rates will reflect this.

Also keep in mind that certain makes and models imply behavioral tendencies on the part of the owner. For example, if you own a car that is typically used for street racing, your auto insurer will assume you intend to race. Hence, your premiums will be higher.

#2 - Past Accidents, Moving Violations, And Convictions

This is one of the most significant factors used to calculate your car insurance rates. Your driving history suggests your future decision-making behind the wheel. If you have made decisions which are considered reckless, the insurers assume you will make similar decisions in the past - and will lead to claims.

Among the details your insurer will consider are the number of demerit points you've received, moving violations, and accidents for which you were found at fault. If these items are lacking on your driving history, you'll enjoy lower auto insurance rates. If, on the other hand, your history is marred with them, expect higher rates.

#3 - Your Personal Information

Your personal history can be divided into two categories: items you can influence and those that lie beyond your control. The first classification has to do with whether you're married, your job, credit score and whether you rent or own property. Your car insurance company rewards signs of stability since they imply less risk of future claims. Thus, being married, having a high FICO score, remaining in the same job for several years, and owning a home can lower your rates.

The second category includes your age and gender. If you're under 25 years of age, your insurer will perceive you - fairly or otherwise - as a higher risk than a policyholder in his 40s. Regarding gender, there has traditionally been a disparity in premiums between men and women. Essentially, men pay more for coverage. This disparity has been narrowing in recent years.

#4 - Where You Live And Park Your Vehicle

Your living address and parking location also play important roles in determining your premiums. Theft and vandalism are more problematic in some areas than others. If you normally park your vehicle on the street, it will be exposed to both. Your insurer will presume this poses a higher likelihood of future claims, and will increase your rates to compensate for the risk.

Conversely, suppose you parked your car in a locked garage or a well lit, guarded facility. In such a case, your auto insurance company might presume the likelihood of theft or vandalism is low. As a result, your premiums are bound to be lower.

Working Toward Lower Car Insurance Rates

When you shop for auto insurance, keep in mind that your rates are closely entwined with your vehicle, driving record, personal details, and where you park your car. There are, of course, other factors at work. The type of coverage you buy, your limits, discounts, and deductibles will also play important roles. The takeaway is that each of these items - with the exception of your age and gender - are under your influence. That means there's plenty you can do to lower your car insurance rates.