12 Factors that Impact Auto Insurance Rates
Your auto insurance premium is affected by many different factors. Some of these you can control and others you cannot. This article will explain 12 of the most important factors that impact auto insurance rates, which include:
- Your driving record
- If you’ve taken driver’s training
- Your insurance history
- Your credit rating
- Your demographics
- Where you live
- How you use your car
- How much you drive
- The make, model and year of your vehicle
- The value of your vehicle
- Security or damage prevention devices
- Your insurance options including coverage, limits, and deductible
We’ll discuss each of these factors in more detail below.
Your Driving Record
Your driving record includes the number of years you’ve been licensed as well as tickets you’ve received and accidents you’ve been at-fault in.
Generally, the longer you’ve been licensed, the lower your insurance rates will be. Keep in mind that lapses in your license can impact your rates as well.
Minor tickets stay on your driving record for three years while major infractions (such as driving under the influence) can affect you for longer. Tickets do not include photo radar or parking tickets.
Accidents generally stay on your record for six years but can impact your rates for up to ten years. If you weren’t at-fault in an accident, it won’t be on your record.
Driver’s Training Courses
Approved driver’s training courses can get you a discount on your auto insurance rates. Talk to your broker to ensure your driver’s training course is approved.
Your Insurance History
Insurance companies look at your insurance history to determine if you’ll be a “good” customer. Generally, they want to see someone who has been consistently insured with no payment issues. Usually, the longer you’ve been insured, the lower your rates are.
Mid-term cancellations (especially if they were for non-payment) and periods of being uninsured can mean your rates are higher than if you had stayed consistently insured. However, this will depend on the insurance company, the reason for cancellation, and the period of time you’re uninsured.
Your Credit Rating
A good credit rating shows insurance companies that you’ll likely be a good client who pays their bills. It is optional to allow an insurer to check your credit score, but it can get you a discount on your auto insurance premiums. This credit rating check doesn’t impact your score.
Auto insurance companies use statistics to determine how likely it is that you’ll be in an accident or make a claim. Here are some demographics that commonly impact your auto insurance rates:
- Marital status
For example, younger drivers are more likely to be in an accident, so they’ll often have higher rates.
Where You Live
The crime rate and claim rate of where you live affects your auto insurance rates. The higher the likelihood of theft, vandalism, or a claim, the higher your auto insurance premium will be.
For example, many residents of “hail alley” in Alberta have higher car insurance rates. The area that stretches from around Calgary to nearly Edmonton experiences above-average hailstorms which result in frequent hail damage to vehicles.
How You Use Your Car
Certain activities mean that you’re more likely to be in an accident or have a larger claim. If you commute, carpool, or use your vehicle for work purposes, you will likely pay higher auto insurance rates.
How Much You Drive
Statistically, the more you drive, the more likely you’ll be in an accident. Your auto insurance rates will correspond with how much you drive. If you drive a lot, they’ll be higher than if you drive very little.
The Make, Model, and Year of Your Vehicle
The make, model and year of your vehicle have a major impact on your auto insurance rates as it indicates:
- The theft rate of the vehicle
- The claim rate of the vehicle
- The safety features of your vehicle
- The repair or replacement cost of the vehicle
The make, model and year of your vehicle helps your insurance company predict how likely it is your vehicle will be involved in a claim and if so, how severe the accident will likely be, and how much it will cost them.
The Value of Your Vehicle
When you purchase auto insurance, you decide which loss settlement you want if your vehicle is a write-off in a claim. The purchase price of your vehicle is often used as the basis for the loss settlement.
Let’s say you bought a vehicle for $25,000. If you chose actual cash value, you would be paid the purchase price minus depreciation. If you chose replacement cost, you’d get around the price of what you paid for it – whatever it would cost to get the same vehicle or something of similar kind and quality today.
Security and Damage Mitigation Devices
Insurance companies may give you a discount on your auto insurance rates if you have approved security devices or damage mitigation devices installed on your vehicle. A common example is a security alarm to help prevent theft.
Different insurers may accept different devices, so talk to your broker about which ones can get a discount with your insurance company.
Your Insurance Options
Your insurance options have a large impact on your auto insurance rates. Your choices include:
- Your coverage – determines what’s covered by your auto insurance
- Coverage or policy limits – this is the maximum amount that will be paid out in the event of a claim, either for a certain coverage or the overall policy
- Loss settlement – this is how the payment will be calculated if your vehicle is a write-off in a claim
- Deductible – the amount you pay out of pocket before your insurance takes over
Work with an experienced auto insurance broker to ensure you have the coverage that fits your needs and budget. They’ll help you choose the right protection, limits, loss settlement and deductible amount.
Telematics – Usage-Based Insurance
Telematics, also known as usage-based insurance, can give you customized auto insurance rates. Telematic devices or mobile phone apps track your driving habits and apply a discount to your insurance based on how good of a driver you are. Currently, insurers are not allowed to use this information to raise your rates.
Talk to an insurance broker if you have any questions regarding your auto insurance rates.