What factors contribute to auto insurance rates?

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What factors contribute to auto insurance rates?

By NAZHAT SALIM

Everyone remembers their first car: the way it smelled, the smoothness of the steering wheel and the exhilarating rush of freedom that came with it. Amidst all of this, it can be easy to forget about the less fun aspects of owning a car, like auto insurance. However, finding coverage can be less daunting if you know what factors contribute to rates and what you can do to improve your chances of getting a more affordable premium.

Driving record

The most important factor auto insurance companies usually consider is your driving record, which houses your history of driving-related violations, convictions, collisions and departmental actions. In most states, points are assigned to your record for particular traffic tickets or other violations. Ideally, you'd maintain a spotless driving record, but if you have a few blemishes on your record, don't fret. If you drive violation-free for a period of time, your state may deduct the negative points. Moreover, some states will drop points off a set number of years after the violation that caused them, though the amount of time it takes these points to drop off usually varies by the type or seriousness of the violation. It is always a good idea to know what your driving record contains - and that the information is correct - before shopping around for insurance quotes.

Traffic tickets

Traffic tickets are another major determinant for insurance providers. If you get caught speeding, you can most likely expect to see an increase in your premium. Some companies will even raise your rates, as excessive speeding is correlated with higher accident rates, which makes you a bigger potential risk to the insurance provider. However, if you have a good relationship with your insurance company and a previously clean driving record, they might not raise your rate if it's only one ticket. Additionally, you may be able to have traffic tickets removed from your record by enrolling in traffic school or taking a driving course.

Accident claims

Insurance companies also consider the number of accident claims you have filed, regardless of whether you were at fault or not. If you were at fault and the negligence was the result of a traffic violation, you can generally expect a significant jump in your rate. Also, the more claims you file, the more likely your insurance company will detect a pattern and label you as high risk. However, you may be spared from a rate increase if your insurance provider offers an accident forgiveness program, which may save you from being penalized following your first at-fault car accident if you previously had a clean driving record.

Risk of auto theft

In addition to accident claims, providers often look at the risk of auto theft when calculating your rate. This means you could pay more for living in a state with a high rate of auto theft or if you drive a vehicle that is commonly stolen.

Auto insurance score

Since studies show that a person's credit-based auto insurance score correlates to their insurance risk, many insurance companies factor in a credit-based score into their review process. These scores are usually based solely off of credit report information, so it's important to check your report regularly for mistakes. You always have the option to contact your creditors and the credit bureaus to dispute any errors.

Age, gender, marital status and occupation

Some other factors that could contribute to your rate include your age, gender, marital status and occupation. These may seem random and irrelevant, but it's important to keep in mind that insurance companies need to predict how big of a risk you may be to them. Statistically, teenage and elderly drivers are more prone to being involved in an accident, so these groups can typically expect higher premiums. Men are also usually charged more because studies have shown that women drive less, take fewer risks, and are not as likely to be involved in accidents. Data also suggests that married drivers drive more safely than their single counterparts, so many companies will take that factor into account. Lastly, your occupation may indicate approximately how much you will be driving, and simply driving a lot increases your risk of having an accident.

Deductibles, type of vehicle and lapses in coverage

The former factors might be out of your control, but you do have more control over the following factors: deductibles, type of vehicle and gaps in coverage. Generally speaking, a car deductible is what you pay towards a car accident or other insurance claim before your insurer pays the rest. Taking on a higher deductible can substantially reduce your rate. Driving an older, less expensive car also usually results in a cheaper premium since new, expensive cars cost more to repair and replace, and are more susceptible to theft. Finally, having lapses in your auto insurance coverage can be counted against you even if you have a perfect driving record. Generally, people who fall into this group pay higher premiums and have fewer options to choose from, so it is important to always be insured.

Bottom line

As many factors that are used to determine your auto insurance rates are out of your control, it's always a good idea to shop around and get quotes from multiple companies, and find out if you qualify for any discounts, like good student or good driver discounts. Just make sure you think twice before you allow several creditors to run a hard inquiry on your credit.

With the best possible coverage, the soft purr of your engine and the wind in your hair will always remain stress-free. And remember, though auto insurance may not be free, Credit Karma always will be!

About the author: is a Member Support Specialist at Credit Karma. She spends her free time reading, devouring desserts and talking to her slightly deaf cat, Pusho. When she's not doing those things, she is dreaming about doing them.

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All Comments

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1 Contribution
67 People Helped

Helpful to 67 out of 72 people

This ratiang appears to be market motivated for the Insurance Companies to charge more money.  I have an excellent credit score, no accidents, I fly airplanes, but I have a "fair" auto insurance risk???  Your algarithems are way off base.  Perhaps a class action suit would help for straighten out the erroneous ratings that you are giving people.   And I'm not the first person with excellent credit and history to get this low Insurance rating!  Appears to be just plain "Bull ****!"

Reply by
nascarfan16

1 Contribution
18 People Helped
Helpful to 18 out of 20 people

I totally agree.  They are giving me a poor rating and I find no reason for it, only so that the insurance companies can charge excellent customers more money.  So not fair.

Reply by
DakotaDyson

1 Contribution
26 People Helped
Helpful to 26 out of 26 people

Insurance scores are just made up, same as credit scores, to benefit the companies who came up with them. (otherwise they'd have the exact formula avilable for scrutiny).  

Been driving 20 years, no tickets, no accidents, no claims at all, oldest car I drive is 7 years old - all but one of three is paid off (and I'm "ahead" on that one), never had a lapse, always insured more than state minimums. I got a perfect 100% rating in all categories when I did the Progressive "snapshot" thing....  

Yet I'm only dead-center in "fair".

Reply by
clevenger23

3 Contributions
26 People Helped
Helpful to 14 out of 14 people

there was once a class action suit againts the credit companies, but they lost. In their findings they did prove that all credit scores are in place only to get the most money out of the suckers as they can. why do you think a poor person with an average or lower score they will only give an auto loan to at a loan shark with like 15% or more intrest. they know they are more likely not ba able to aford it and get it repossed and then they sell it again to make more money. where in reality if those same people where given a chance and a normal rate in the 5-6% area their payment would be lower and they could better afford their car. Or what ever they are financing.   they know they can sucker people and make their greed money and then move to the next....

Top Contributor

Reply by
Takotsubo

22 Contributions
139 People Helped

If you live in CA (and some other states) these scores do not have any bearing on your insurance rates since they are deemed not legal for calculation of your insurance rates and rates are based on your driving record and demographic information alone. This can be good thing, if you insurance score is low and have a clean driving record - but can be a bad thing if you are a higher risk driver, even with a few tickets since they have fewer criteria to base their criteria on. One of those things, you take the good with the bad !

Reply by
howardc69

1 Contribution
0 People Helped

Enter Your Reply immediately suffering from the same problem. I've been driving for 30 years have 0 accidents, 0 tickets 0 claims but my insurance credit score says very poor? Where do they come up with this crap?

1 Contribution
34 People Helped

Helpful to 34 out of 35 people

I had Geico for like 12 years. No at fault accidents, and only 1 accident about 9 years ago and the other driver was charged. Never missed a payemnt, and always on time. No lapses in insurance. However my rates went up every year while driving an old buick sedan over ten years old. Up to last year I was paying over $1600 for minimal coverage at 65 years old.  I decided to shop around and got a quote for even better coverage for over $500 less a year than what I was paying Geico. So it pays to shop around. 

Reply by
FNAkun

1 Contribution
4 People Helped
Helpful to 4 out of 5 people

Who are you with now?

Reply by
clevenger23

3 Contributions
26 People Helped
Helpful to 10 out of 13 people

I had Nationwide and went they doubled my premium becuase i had a hit and run, so i had to use my insurance because the police never cought the person, i instantly went to look some where else. tried Geico, they wanted $1500 for a 6 month policy for my car. yes full coverage but still. went to Allstate, $582. exact same coverage limits. now i have a brand new truck with higher coverage on it, and i only pay $714 for a 6 month premuim. so yeah, i will never go to Geico.

1 Contribution
22 People Helped

Helpful to 22 out of 23 people

I am agreeing with first comment!  I have excellent credit, no tickets, involved in a hit and run accident, otherwise accident free, pay  premiums on time.  Yet, I have a fair rating.  BULL

1 Contribution
21 People Helped

Helpful to 21 out of 22 people

Instead of making threats to sue we should be thanking CreditKarma for allowing us to use the site. All other sites I have found charge a fee while this site remains free.

I do agree the way some of the scores are calculated are unfair but CreditKarma is just giving us the facts to help us improve. These are not their rules but the system rules....  

Maybe if enough people speak up about the system that could eventually change or at least improve.

Reply by
bkkarma12

2 Contributions
12 People Helped
Helpful to 10 out of 11 people

I don't believe the original poster was referring to a class action lawsuit against creditkarma, but one against the companies that formulate the scores (most likely the insurers themselves). I just can't believe someone with no tickets, accidents, perfect credit like the original poster (and others that commented) would have less than an EXCELLENT auto insurance score. 

The same should apply to the "homeowners insurance score" that they show as well.

I think it's just a way the industry can manipulate scores to force consumers to pay a higher premium.

Reply by
clevenger23

3 Contributions
26 People Helped
Helpful to 2 out of 2 people

not sueing Credit Karma, they dont make the scores. he was refering to the Credit bureaus.

1 Contribution
11 People Helped

Helpful to 11 out of 12 people

Let me see if I understand this correctly. I'm a single male, retired LEO, No tickets, No accidents, No Insurance claims, EXCELLENT (800+) credit history, my auto is insured by USAA, live in a gated community and drive LESS THAN 3,000 miles per year -- AND I RATED "FAIR" for automobile insurance????????

Reply by
op22

2 Contributions
2 People Helped
Helpful to 1 out of 1 people

I have 800 (excellent) automobile insurance score and it totally surprised me. I have a fair credit score (680) and 5 traffic tickets in the last 4 years (nothing major and no claims)....my GEICO premiums are very high (at least to me) $433/6 months/limited liability cheapest plan that jumped from $180/6 months from the time when I had no tickets....

So really how do they calculate automobile insurance score??? ...

Reply by
op22

2 Contributions
2 People Helped
Helpful to 1 out of 1 people

Actually I meant 900 (my automobile insurance score) .. xa-xa.....5 traffic tickets will give a perfect score! :-(

1 Contribution
8 People Helped

Helpful to 8 out of 8 people

Before they changed the way we where rated, I had an excellent score. Now I have a poor rating. I always pay before due date, no accidents,and  no tickets in the last 15 years. What is going on?  This is not right. They should at least tell us how we are rated.

Reply by
bkkarma12

2 Contributions
12 People Helped
Helpful to 2 out of 3 people

If they told us how they rate us then everyone would know the rating system is a crock. otherwise we'd all know the "secret" to raise our scores to pay less in insurance!

8 Contributions
240 People Helped

Helpful to 7 out of 7 people

Mine is an 814 score, which they show is a 'POOR' rating which is Ridiculous to say the least!!!  I've had NO tickets, NO accidents, NO lapses in coverage and I carry full coverage with $100 deductable on comp and $750 ded on collision on 2 vehicles.  There is NO reason whatsoever that I should have a poor rating, unless they are discriminating against my age (I am 58)!  This makes me so angry that they can do this!!!!  It's a RACKET!!! 

1 Contribution
7 People Helped

Helpful to 7 out of 7 people

The insurance companys put whatever score they want on you . There just out for the money and could care less about us. My credit score is excellent  but with the insurance companys it,s just rated as fair .Something needs to be done about it !!!!!

2 Contributions
5 People Helped

Helpful to 5 out of 6 people

What is considered 'elderly'?

Top Contributor

Reply by
CKCharmaine

512 Contributions
1140 People Helped
Helpful to 7 out of 10 people

Generally speaking, "elderly" means someone who's 60 years old and over.

Reply by
fayeanddon

1 Contribution
1 Person Helped
Helpful to 1 out of 1 people

We found out this year when my husband turned ( 71 ) that's when your ins. will really jump.  So, being that I'm 7yrs younger, we had it put in my name, adding my husband.  Came down over $150 for 6 mo. premium.

1 Contribution
1 Person Helped

Helpful to 1 out of 1 people

Is my auto insurance score poor because I don't drive?

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