Auto insurance is one of the largest purchases a person makes each year. And it's also one of the most confusing. Several different factors go into how your insurance premiums are calculated - in fact, it's so confusing that there's no simple formula a consumer can use to figure out what a premium should be. There are some rules of thumb, however, that you can follow to understand your premium and, possibly, lower them. No matter what, consumers should seek out competitive quotes from different insurance companies before settling on a policy. By doing this, you can feel confident that you're getting the best coverage for the money you spend.
Factors That Impact Your Costs
There are several factors that can affect the auto insurance premium you pay. But these are among the most important:
- Age: Drivers age 25 or older will generally pay less; divers between age 50 and 65 statistically have the safest driving records and, as a result, will enjoy some benefits related to their premiums.
- Sex: Women tend to have lower premiums because they are statistically safer drivers than men.
- Marital status: Married people pay less than single people with identical driving records.
- Location: If you live in an area with heavy traffic and congestion, you are likely to pay more.
- History: Your driving record will impact your costs, for good or bad.
- Your wheels: Economy cars typically result in economy-ish premiums; luxury cars have luxury premiums.
- Credit: Drivers with good credit scores are considered to be low risks for credit; they're also considered low risks for accidents. As a result, their policies tend to be lower.
- Your job: If you are on the road all day for work, it's likely that you're at a greater risk of an accident than someone who sits behind a desk all day.
- Your commute: People who have short commutes are on the road less and, thus, are not necessarily as great of a risk for accidents when compared to someone who has a 90-minute commute each day.
- Your ZIP code: Where you live can affect your premium positively or negatively. Insurance companies have data on ZIP codes throughout the nation; some have been proved to be more accident-prone (and therefore more costly for insurance companies).
- The purpose: Are you driving for business or pleasure? Every day or occasionally? Is the car garaged, or parked outside? These factors can all play a role in determining your premium.
How to Keep Your Costs Low
While there is no set rule on how to keep your premiums down, there are strategies you can employ. These strategies include everything from smart money management to practicing safe driving habits. Here are some tips for keeping your costs down:
- Pay your bills: Drivers with good credit records generally also have lower premiums.
- Don't have accidents: You might be eligible for a discount the longer you go without an accident.
- Get competitive quotes: Shop around for your auto insurance by reviewing competitive quotes from multiple insurance companies. This will help you compare coverage and verify that you're spending the right amount.