The Factors That Really Affect Your Insurance Rates

You may have heard the myth that driving a red car can increase your car insurance rates. Allegedly, insurance companies view the drivers of these types of vehicles as higher risk takers. One study found that 44% of Americans believe this myth.

There is no truth to this myth, and the color of your car does not affect the rate you pay for insurance. However, there are other factors that do affect your insurance payment that you should consider.

What Affects Your Insurance Rates

Understanding what affects your insurance rates can help you figure out how to make changes and lower the fees you pay every month. The industry term for this is an insurance rating factor, which is a characteristic that determines how much you will have to pay to insure your car. For example, your age is one rating factor that companies use to calculate rates.

These factors include personal characteristics and other things, such as your credit history. You may be able to change or influence some of them, but you cannot alter all of them. Your age is one factor that is stable and unchangeable.

It is important to remember that different insurance companies use a variety of rating factors, and they do not reveal the details to their customers. Even the companies that use similar factors may calculate them differently, so you may end up with a different quote from each of them.

Age

Your age is a common rating factor that most insurance companies in the United States use. In general, if you are older than 25, then your insurance rates tend to be lower. Have you ever wondered why being over 25 matters? Science has the answer.

Researchers have found that your brain is mature around the age of 25. In particular, the decision-making portion of the brain needs more time to develop. The prefrontal cortex affects your ability to control impulses and reason, and it is this part of your brain that needs until 25 to mature.

Although insurance companies focus on the age of 25, everyone is different. Your prefrontal cortex may need more or less time to develop. Unfortunately, car insurance companies have to use an average age for their calculations, so your personal maturity levels cannot be measured.

Gender

Some states do not allow insurance companies to use gender as a rating factor. However, there are states that permit this, and companies tend to charge higher rates for younger males. They claim that younger males are higher risk takers and deserve to pay more for insurance.

In general, insurance companies do not charge younger female drivers more because they are considered more mature. According to research, women tend to mature faster than men.

Driving History

If you have a driving history filled with serious accidents and other problems, you know the insurance rates on your car will be high. However, even small infractions like a minor traffic ticket can still be an issue. You may want to look up your driving record and check to make sure it is accurate. The best way to do this is to go to your state's bureau of motor vehicles and get the information directly from the source.

For example, if you live in California, you can access the California Department of Motor Vehicles' website and request a driving record online. You will have to sign up for an online account, verify your information, pay a fee and download the record.

Some states, like Georgia, give you the option of obtaining a certified or noncertified version of the driving history report. The certified versions can take more time to process. If you are simply trying to determine what is on your record and do not need the document beyond personal use, the noncertified version may be enough.

Insurance Claims

The number of insurance claims you have made in the past can play a large role in how much you pay today. In general, many companies raise your fees if you make a claim. According to some estimates, drivers who make a claim for an accident may pay up to 50% more for their car insurance. Claims made against you also count because insurance companies look at your entire record.

Some insurance companies now offer accident forgiveness coverage, which promises they will not raise your rates after the first claim. However, drivers who file multiple claims after several accidents will not qualify for forgiveness coverage and will see their rates go up.

Amount of Driving

Do you drive several hours every day, or do you work from home and rarely use the car? The total amount of driving you do can affect how much you pay for car insurance. Drivers with low mileage may be able to install a gadget in their cars to track them and get a lower rate. Not every insurance company participates in this, and some do not offer discounts for low mileage.

Pay-per-mile insurance is an option for some drivers with low mileage. You would only pay for what you drive, which can be a bargain for people who do not use their car often. This is also an advantage for seniors who are retired.

Credit History

Insurance companies use your credit history to determine your rates. They do this to check how much of a risk you are for them. They believe that drivers with poor credit scores and history are a greater risk and may be less safe on the road. They also state that drivers with poor credit are more likely to file a claim since they will not be able to afford repairs on their own.

Many factors affect your car insurance rate, but car color is not one of them. However, your age and gender are common factors. So are your insurance claims, driving history, credit history and the amount you drive every day. There are rating factors that you cannot change, like your age, but there are some that you can improve, such as the credit score.