What Affects Your Auto Insurance Rates? Part Two

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You renew your auto insurance policy or get an insurance quote and see that your rates increased.

Why? What Affects Your Auto Insurance Rates?

Now that we’ve covered some of the group claim trends that are causing auto rates to increase let’s talk about some personal things that can affect your auto insurance rates.

Think about it for a moment: you’ve probably had a conversation before about your auto rates with a relative, a coworker, maybe a friend and you realize they’re premiums are different from yours. So why the difference?

There can be a variety of factors that cause different premium prices but they all boil down to one thing. Risk.

Risk and Your Car Insurance Rates

Risk is the name of the game in auto insurance.

Risk is what you are transferring to the insurance company so the higher the risk the higher the premium prices.

What are some risks that could cause your premiums be be higher?

Things like:

Credit. Yes insurance companies do look at credit scores but it’s slightly different then what a bank looks at when you’re applying for a loan. Yet the principle remains the same: the better the credit score the lower risk you are to insure. Specifically speaking the higher the credit score the more likely you are to make payments in full and on time.

Age. Age plays a huge factor in auto rates and the data has been proven year over year. If you’re 16-21 years old you are a bigger risk for insurance companies because this group of the market accounts for a very large portion of the accidents every year. The second highest risk group are people over 65. They account for the second largest portion of accidents every year. I know this doesn’t seem very fair, especially if you haven’t had any accidents but the data doesn’t lie. Year after year the data is the same so this will make a difference in your premiums. However, you are in one of these age brackets you can still end up paying less than others in your same age bracket by being lower risk in any/all of the other categories.

Number and Type of Vehicle You Drive. Every insurance policy is rated not only for every driver but it is also rated by the type of vehicles you drive. If you drive a big heavy ¾ ton truck your rates are going to be higher than your neighbor that drives a 4 door sedan. If you drive a Tesla, you’re going to pay more than your coworker who drives a minivan. The bigger the vehicle, the greater the chance of more damage in an accident. The newer/more expensive the vehicle, the more expensive that vehicle is to repair/replace. And of course, if you have 5 vehicles on your policy, you’re going to pay more than your brother who has 2 vehicles.

Number of Drivers and Driving History. The number and age of each driver will be calculated into your premium. So yes if you have drivers in the youthful category or the senor category that will affect your rates. Also the driving record of every driver listed on your policy will be checked by your insurance company. This means any accidents and/or tickets on your record in the last 3 years will affect your rates negatively.

Home Address. Why would insurance companies care about where you live? Because where you live could mean your vehicle has an increased risk of theft, vandalism or even accidents due to traffic congestion. All of these factors can affect your rate although they usually don’t affect it near as much as the other categories.

Insurance History. Why type of insurance company you have now, what type and how many claims have you had, has there been a lapse in your insurance coverage…all these things can also affect your rates.

So what can you do to keep your insurance rates as low as possible?

First, ask about discounts.

Most insurance companies give you discounts for bundling your home/auto together.

Usually the more policies you have with one carrier the better the discounts you get.

Also you can qualify for discounts affinity discounts for your chosen profession or discounts for how you pay.

You can even get discounts for your youthful driver having good grades!

Also get a good insurance agent that’s going to review your policy every year. If you have an active agent they want your premiums as low as possible too because they want to keep you! So they’re going to be motivated to look for things like discounts, accidents falling off even rerunning credit to see if they can help in any way.

A Little Public Service Announcement

I’d like to finish with a little public service announcement.

I know this might not be popular but I feel like it’s important that you all have the rest of the story, as Paul Harvey use to say.

I know there have been a lot of hard feelings about the auto rates lately.

People have this impression that because their auto rates are going up insurance companies are growing rich and fat off their insurance premiums.

The consensus I’ve heard lately is that greed is driving premiums up. Big corporations lining their pockets (that’s a direct quote I heard recently).

I understand the frustration I really do.

But the conclusion drawn by many is simply wrong.

Insurance companies as a whole are not lining their pockets with your auto premiums.

In fact, they’ve lost money on their auto policies here in Texas consistently for the last few years.

The reason is simple. The market is extremely competitive.

That means insurance companies can only afford to earn a small profit on each dollar they collect, or they’ll be forced out of the market.

That means margins are very, very slim.

The problem in the last few years is that claims have been way up in Texas.

There have been more claim payouts then premium payments on a pretty consistent basis.

Yes the companies have reserves that can float them for a little while but when the trends continue year after year, which they have, there’s nothing for insurance companies to do except raise rates or stop selling insurance.

Those are the only 2 choices.

One report I saw from one of the major insurers here in Texas stated for every $1.00 they took in for 2016 they paid out $1.19 in auto insurance claims.

Unfortunately, that trend has been more the rule than the exception for the whole industry here in Texas.

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