By EMMET PIERCE
Do you feel like you pay too much for auto insurance? To qualify for the best rates, you need to be viewed as a low risk by insurance underwriters.
To be profitable, auto carriers must set their rates high enough to offset potential losses. According to 2013 data from the nonprofit Insurance Information Institute (III), the average annual car insurance premium is about $840, but that figure may rise substantially if your carrier thinks you pose a greater risk.
Here are five things that can drive up your auto insurance rate.
1. Having a Poor Credit History
Janet Ruiz, a spokeswoman for the III, says most state insurance regulators allow carriers to factor in credit histories when they set car insurance rates. Carriers use credit-based insurance scores to predict how likely you'll be to make an insurance claim.
According to the California-based United Policyholders consumer group, only California, Hawaii and Massachusetts bar insurers from considering credit histories when setting rates.
If you're worried about your credit score, there are numerous ways you can improve your credit health over time, including:
- Making sure you pay all of your bills on time.
- Trying to keep your credit account balances around 30 percent of your credit limit or lower.
You may also want to consider checking your credit reports several times each year so you can track your progress and correct any errors you find.
2. Buying an Expensive Car
Typically, the more your car costs, the more expensive it will be to repair or replace, says Carole Walker, executive director of the Rocky Mountain Insurance Information Association.
"When you spend more on a car, you may also spend more on insurance," she says.
Before you make a car purchase, ask your insurance agent about the impact on your auto insurance rates or use an online auto insurance calculator. Your agent can help you identify makes and models that are beyond your insurance budget.
3. Moving to a ZIP Code With a High Frequency of Claims
Because the environment you live in can influence your likelihood of having an accident, insurance companies may factor in your ZIP code when setting your rate. Walker says rural communities generally have lower car insurance rates than urban areas because there's typically lower traffic density and less risk of vandalism or theft.
If you move from an area that has few claims to one where they're more common, your insurer may be concerned about the increased likelihood you'll make a claim and may raise your rate as a result. They do this by considering your new ZIP code's historical claims data before adjusting your rate.
4. Getting Traffic Tickets
If you ignore the rules of the road, you'll end up paying more for car insurance, says Kevin Foley, a New Jersey insurance agent. Generally speaking, any tickets for moving violations you receive can be used to justify higher rates. These moving violations include citations for speeding, failing to stop and reckless or careless driving.
"Tickets demonstrate that you're an at-risk driver," Foley says.
Walker says your goal should be to have a driving history free of traffic tickets. Insurance carriers may factor in traffic violations for several years after the violations have occurred. For example, Esurance asks car insurance applicants if they've had any moving violations over the past three years.
"That's pretty typical," Ruiz says.
If you're convicted of driving while under the influence of alcohol or drugs (DUI or DWI), the violation may be used to justify higher car insurance rates for longer than three years. For example, Esurance continues to consider such convictions for a decade.
5. Making a Claim
Everyone needs auto insurance to protect themselves from losses, but if you have to use your policy, there's a chance your insurance rates will rise.
In February 2016, a study by insuranceQuotes.com found that drivers who make a single claim of $2,000 or more see their rates increase 44 percent on average.
Walker says that if another driver is at fault, his or her auto insurance will typically cover the claim, and your rates won't be affected.
However, if you live in a no-fault state (District of Columbia, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania or Utah), it usually doesn't matter who was at fault for the accident; you'll generally use your own policy for medical costs for minor injuries, car repair costs and lost income, up to the policy's specified limit.
What To Do If Your Rates Rise
If you see an increase in your car insurance rates, try to determine the cause. Your car insurance agent may be able to provide guidance. In addition, here are some other strategies you may want to consider:
Shop for a new auto policy each year. Insurers often weigh rating factors differently, so the quotes you receive may vary greatly. However, make sure that if you opt for an inexpensive policy, you still have the amount of coverage that you need.
Compare insurance quotes. Insurance companies routinely adjust prices. The only way to know you're getting the best deal possible is to compare insurance quotes.
See if you qualify for discounts. Common auto insurance discounts include a discount for bundling your auto and home policies, paying your annual policy in full or going paperless for your bills and policy papers and choosing to receive correspondence online.
Many factors can affect what you pay for auto insurance. Some may be in your control, while others aren't. Generally, the best way to get low rates is to make sure you're viewed as a low-risk policyholder. You should strive to have a strong credit history and a clean driving record.
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