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The Factors that Determine Your Car Insurance Rates
Scroll through any local Facebook page, and you’ll inevitably come across a post from someone asking how much others are paying for their yearly car insurance premium.
While it doesn’t hurt to crowdsource this information from your friends and neighbors, the details they share won’t necessarily be applicable to your specific coverage needs. There are a variety of factors that determine your annual auto insurance premium, and each of them are unique to you!
So, what are the factors that decide your auto insurance rates? Here’s a quick lesson in what insurance carriers consider when determining the cost of your car insurance coverage each year:
- Driving Record – Accidents, moving violations and other incidences that cause you to put in a claim often create a rate increase. These incidences typically affect your insurance rates for anywhere from three to five years.
- Claims History – As you might expect, the cost of your policy or the exact amount that your policy increases after you file a claim, varies based on severity of the situation and size of the claim. Drivers who have clean records with no tickets or accidents can expect to pay a lot less than those with moving violations, crashes, DWIs and other incident that make you look more likely to file a claim to an insurance carrier.
- Credit Score – While this varies depending on the state you live in and the insurance carrier you work with, a lower credit score (under 600) often equates to a higher insurance premium. Reason being: Studies show that people with lower credit scores are more likely to file a claim or even commit insurance fraud. Likewise, some carriers may require a client with a lower credit score to pay a large percent of the premium upfront to in hopes of avoiding future lapses in payment and coverage.
- Location – Drivers that live in a highly populated area often pay more in premium than drivers that live in less densely populated towns and cities. It is presumed that those who live in more congested areas have a higher likelihood of getting into an accident. Likewise, people that live in areas with higher rates of vandalism, car theft and even harsh weather patterns, may be subject to paying more than those that live in zip codes that don’t meet these criteria.
- Usage – How you use your vehicle, and how many miles a day you drive, also play into the cost of your car insurance coverage each year. A driver that uses their vehicle to get their children to-and-from school or to run errands, will most definitely pay a lower premium than someone who commutes an hour in each direction for work five days a week.
- Amount of Coverage on your Vehicle – The higher the coverage you have on your auto policy, the higher the premium. Auto insurance policies encompass coverages such as Liability, Collision and Comprehensive, Uninsured/Underinsured Motorist & Medical Payments or Personal Injury Protection (PIP). All are valuable, especially if an incident occurs and your coverage is needed, so when reviewing your options for coverage, keep in mind that the old adage “you get what you pay for” absolutely applies.
- Type of Vehicle – Not surprisingly, the type of vehicle you drive affects your insurance rates. For instance, a sportscar costs more to insure than a sedan. Luxury vehicles are most costly to insure than a sportscar. A rule of thumb to keep in mind when it comes to the type of vehicle you own and the cost of coverage: the more expensive the vehicle, the higher the insurance premium.
- Number of Vehicles – Drivers with more than one vehicle (e.g., a married couple) qualify for a multi-car discount, which automatically makes their rate per vehicle lower. Likewise, drivers that pair their auto coverage with homeowners and/or an umbrella would also be eligible for lower rates on their auto coverage.
- Coverage History – Drivers who have had lapses in coverage or who have not carried insurance coverage previously (e.g., a newly licensed driver) often pay higher premiums than those who do not have these factors in their recent insurance history. Factors like these will increase your premium for a few years, but not forever.
- Age – Statistically, young and older drivers have shown to be more prone to distracted driving, accidents and other incidences behind the wheel that commonly result in insurance claims. As a result, drivers under the age of 25 and over the age of 70 typically face higher auto insurance premiums than those who are “in their prime” or middle-aged. Drivers with less than three experience on the road are considered “inexperienced” and as a result, considered to be more high risk in terms of getting tickets for moving violations or into fender benders. The good news? This doesn’t mean that affordable coverage is impossible to find!
If you’d like to learn more, or get a quote on your existing auto coverage, give us a call at 845-239-4787 or reach out to Vicki Hoffman at vicki@jhoffmaninsurance.com.
When you own a home like your neighbor’s, you can expect certain household expenses will be comparable to theirs. The cost of your homeowner’s insurance, however, is not one of them. There are a variety of factors that determine the cost of your homeowner’s coverage, and they are unique to your home and lifestyle. So why would your homeowner’s premium be different than what your friends and family who own similar homes are paying? Let’s look at some of the factors that determine your home insurance rates: ⦁ Credit History/Score Your credit history/score is something insurance carriers take into consideration when calculating your homeowner’s insurance rates. Payment history, outstanding debt, credit history length, pursuit of new credit, and credit mix are all pieces of your credit history that can make you look favorable or not-so-appealing to an insurance carrier. ⦁ Claims History No matter where you move, your claims history follows you. Insurance carriers look at your claims history to determine your future likelihood of filing claims. The type of claims and number of claims you have filed is carefully reviewed and taken into consideration when determining both your rate and eligibility. ⦁ Distance from Local Fire Department & Fire Hydrant According to the Insurance Information Institute, homes located near fire departments and fire hydrants enjoy a lower premium than those located farther away. The reasoning is simple: in the event of a fire, the incident can be addressed more quickly, and thus, the damage that occurs for an insurance carrier to pay out on can be minimized. ⦁ Coastal Exposure Waterfront property is desirable because of the natural beauty it offers, but if you purchase a home near the coast or in a wind zone, be prepared for a higher insurance premium and a higher deductible when it comes to storms. Depending on where you live, you may also need an additional windstorm policy or separate deductible for hurricanes. ⦁ Multiline Discount Most carriers will give you a better rate on your homeowner’s insurance if you package or bundle it with your auto insurance. The same applies for adding in coverage for your jewelry, boat, motorcycle, etc. The more items you have with one insurance carrier, the better your rates will be. ⦁ Replacement Cost If your house were to burn down, the Replacement Cost would be what it would cost to re-build your home exactly as it stands now. That’s why underinsuring to get your premium down is a bad idea. The last thing you’d want after a catastrophic loss is to find out you don’t have enough coverage to bring you back to where you were before an incident occurred. ⦁ Marital Status Just like married couples get a break on their taxes, they get a break on their homeowner’s coverage. Why? Historically, insurance carriers have observed that couples tend to file fewer claims than singles, and as a result, are seen as lower risk to insure. ⦁ Deductible Amount Your deductible is the amount of money you are willing to pay toward a claim before your insurance coverage kicks in. So, it should come as no surprise that the higher the deductible, the more money you save on premium. Determining the right deductible for your household is an important decision, and one you should work with your insurance agent to make. ⦁ Home Liability Limits Personal liability limits should be carefully considered based on your personal assets. In some cases, it might make sense for a homeowner to purchase an Umbrella policy. In others it might be sufficient to simply carry coverage with higher liability limits. Most standard carriers offer $500,000 in liability, but you can go up to $1 million in liability coverage with an Umbrella. Discuss these options with your insurance agent to select the best option for you. ⦁ Age & Condition of Your Home The size, age, and type of construction of your home all play a role in determining the cost of your homeowner’s coverage. For example, an older home may be more difficult to repair should damage occur – and as a result, more costly for the insurance carrier to pay a claim on because materials today might not be what they were when the house was originally constructed (e.g., plaster vs drywall). ⦁ Wood-burning Stoves & Fireplaces Few things add to the atmosphere of a home the way a wood-burning stove or fireplace do. The same can be said for how it can add to your insurance premium. Although the increase in premium for having these items is small, providing your insurance carrier with proof that your wood-burning stove or fireplace is up to code and has been installed by a licensed contractor might help lower it. ⦁ Swimming Pool or Hot Tub While the increase in premium for owning one of these outstanding additions to your home is small, its important that you have enough liability coverage to address any injuries or accidents that might occur on your property because of your pool or hot tub. If you’d like to ask questions about what you’ve just read or get a homeowner’s insurance quote, give us a call at 845-239-4787 or reach out to Vicki Hoffman at vicki@jhoffmaninsurance.com .
Now more than ever, people are talking about their insurance rates. Whether it’s a conversation amongst friends, or a post on social media that brings it about – there is widespread concern and confusion about why substantial rate increases have occurred with nearly every home and auto policy holder over the past year. Including those with clean records and claims histories.
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