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What factors affect the cost of auto insurance?

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Auto insurance is an essential expense for every car owner, but the cost of insurance coverage can vary greatly from one driver to another. There are many factors that can impact the cost of auto insurance, and it is important to understand these factors so that you can make informed decisions about your insurance coverage. In this blog post, we will discuss the key factors that affect the cost of auto insurance and what you can do to keep your insurance premiums as low as possible.

Location

Where you live plays a big role in determining the cost of your auto insurance. For example, drivers in urban areas typically pay higher insurance rates than those in rural areas. This is because the risk of accidents and theft is higher in densely populated areas. Additionally, cities with higher crime rates (ie. Dallas, Chicago, New Orleans) may also result in higher insurance premiums.

Age and Gender

Your age and gender can also impact the cost of your auto insurance. Statistically, younger drivers are more likely to be involved in accidents and have a higher risk of filing a claim. As a result, insurance companies often charge higher premiums for drivers under the age of 25.

Gender also plays a role in the cost of insurance. Studies have shown that male drivers are involved in more accidents than female drivers, leading to higher insurance premiums for men.

Driving Record

Your driving record is one of the most important factors that insurance companies consider when setting your insurance premium. A good driving record is a sign that you are a responsible and safe driver, which means you are less likely to be involved in an accident or file a claim. Conversely, if you have a history of traffic violations, accidents, or claims, you can expect to pay higher insurance premiums. Generally traffic violations, such as speeding tickets, will remain on your driving record for 3 years before being purged. At-fault accidents could stay on much longer. The state in which you live could determine how long it may remain. For example, in Texas an accident could stay on your driving record between 3 and 5 years. A DUI or driving while intoxicated could stay on your record for 10 or more years.

Type of Vehicle

The type of vehicle you drive can also affect the cost of your insurance. Generally, expensive and luxury vehicles cost more to insure than economy or standard vehicles. This is because repairing or replacing these vehicles can be more expensive. Additionally, sports cars and other high-performance vehicles are often associated with higher accident rates, which can also lead to higher insurance premiums.

A question around this topic we generally receive is how much to Electric Vehicles (EV) compare to regular gas-operated vehicles? Generally, EVs are more expensive because their parts are more costly to replace. According to Insurance.com’s most recent rate analysis, a full coverage policy on a 2021 Model 3 Tesla costs $2,503 a year on average.

Coverage Level

The level of insurance coverage you choose will also impact the cost of your insurance. For example, a policy that includes comprehensive and collision coverage will be more expensive than a policy that only includes liability coverage.

Many people like to opt for state minimum coverage, which allows for less expensive premiums, but if an accident were to occur, you could be out a LOT more than having full coverage.

Deductible

The deductible is the amount of money you agree to pay out-of-pocket before your insurance company will cover the remainder of a claim. Choosing a higher deductible can lower your insurance premium, as you are taking on more of the risk. However, it is important to choose a deductible that you can comfortably afford in the event of an accident.

Some carriers will give a $0 deductible or a low deductible for chipped windshields that are damaged from rocks and other debris.

Credit Score

Who would have thought that your credit score would be another factor that can impact the cost of your auto insurance? Yep. Insurance companies often use your credit score as an indicator of your overall financial stability and responsibility. Drivers with good credit scores are seen as less likely to file a claim, which can lead to lower insurance premiums.

Think about someone with a low credit score, they could be motivated by external factors such as bills or creditors to file a claim to collect insurance money.

Annual Mileage

The number of miles you drive each year can also affect the cost of your insurance. Drivers who put more miles on their vehicle are at a higher risk of being involved in an accident, which can result in higher insurance premiums. If you use your vehicle for work or commute long distances, your insurance premium may be higher.

If you have switched to Working From Home (WFM), ask your agent if your insurance company offers low mileage discounts. Which leads me to the final factor…

Discounts

Finally, there are many discounts available that can help lower the cost of your auto insurance. Some of these discounts include safe driver discounts, multiple vehicle discounts, and bundling discounts for combining your auto insurance with other types of insurance, such as homeowner’s insurance.

In conclusion, there are many factors that can impact the cost of your auto insurance. Understanding these factors can help you find the best deal.

Our agents work with many different insurance companies and can shop the various markets for you. Give us a call to see if we can get you better coverage.

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