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What Affects Car Insurance Rates

3 July 2012 7 Comments

Tips for 20-Somethings—Things You Never Knew Affected Your Car Insurance Rate

It’s fairly commonplace to depict young college students blowing their parent-allotted monthly allowance while living bill free and racking up gallons of student debt. While of course this isn’t always the case, college usually is a strange time where financial responsibility is postponed in some ways. So, it’s no surprise that 20-something college graduates entering the “real world” for the first time are ignorant in more than a few places when it comes to finances (I certainly was). It’s in our twenties that we start to learn what bills really are. Not only are many of us faced with the most horrific student loan debt numbers of all time, we are also faced with a gruesome economy and job market. That being said, there are many things young 20-somethings just entering the world of financial responsibility can do to better manage it all.

Car insurance is one area of finance that we could all stand to know a little more about. One way to save money on car insurance is to have a better understanding of how your insurance rates are set. Here are three factors that affect your car insurance rates that many people don’t even realize:

Where You Live

What many people don’t realize about their car insurance premiums is that rates are set based on more factors than simply their driving history and car make. Even the area in which you live can have a negative effect on your car insurance premium. If you live in an area of town that has a higher crime rate and more accidents on average than other areas, your insurance premium will likely be higher. Sure, this makes sense in some ways. If there are more accidents in the area that you drive most, then you are probably more likely to get into a car accident. This might be something to take into consideration as a newbie college graduate, looking for a new place to live. If you are renting, it might be wise (for more reason than one) to pick an area that is safer and has less crime.

Your Credit History

Many people do not realize just how much your credit history and credit rating plays in how your insurance agency sets your premium. Many companies will base their premium rates in part on how strong a driver’s credit health is. These credit-based car insurance scores are determined by evaluating a person’s loan data and bill-paying history. This can be a huge disadvantage for young drivers in their twenties, who have not had the opportunities to build a strong credit history yet. Things like student debt and student loan payments can negatively affect your credit history, causing increases in car insurance payments. Take this into consideration when you are paying off your student loans out of college. Keeping a strong credit score can affect more than you might have realized.

Demographics

For the most part, we’ve all heard about how the type of car we drive will alter the amount you pay in car insurance. As the scenario goes, someone who drives a red sports car is probably paying a higher car insurance premium than someone driving a beige minivan. However, what many people don’t realize is that rates are also based on the driver of those cars. On average it is more expensive for insurance companies to insure younger drives, therefore making younger driver’s insurance premiums higher. The same can be said about insuring men compared to women. Statistically speaking, more men speed more often than women do. This means that men are more likely to get into a car accident and, therefore, have higher insurance premiums. This, again, is unfortunate for new graduate, gaining their footing in the bill-paying world. Most car insurance premiums do not lower until individuals turn anywhere from 24 to 26 (depending on the company and gender of the driver).

7 Comments »

  • Accountant Wages said:

    The type of car you drive also has an effect on your insurance rates and is something you can control. Inexpensive, used cars are cheaper to insure than expensive sports cars.

  • Asheem Jabbar said:

    Accountant brings up a good point overlooked by some. The value of the car itself has a say in the insurance rates. I found this out for myself when looking at different vehicles at long island toyota a couple of months ago.

  • best essay said:

    Take this into consideration when you are paying off your student loans out of college. Keeping a strong credit score can affect more than you might have realized.

  • driving school said:

    These credit-based car insurance scores are determined by evaluating a person’s loan data and bill-paying history. This can be a huge disadvantage for young drivers in their twenties, who have not had the opportunities to build a strong credit history yet.

  • factoringcompany said:

    The opportunities to build a strong credit history yet. Things like student debt and student loan payments can negatively affect your credit history, causing increases in car insurance payments. Take this into consideration when you are paying off your student loans.