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Auto Insurance Cost: 5 Factors That Influence This Cost

Updated: August 14, 2018

Everyone wants to save money on their auto insurance. But not everyone knows how to get cheap auto insurance.

The best way to get a cheap policy is to know about the factors that influence how insurance companies determine auto insurance costs.

How do companies decide your auto insurance cost?

They take into account a variety of factors, such as the individual’s credit history, age, gender, driving history, payment frequency and other risk factors.

By controlling some of these factors, it is possible to save a lot of money on car insurance. But this requires diligence and long-term thinking on the part of individuals and families.

Auto Insurance Cost: Credit History, Age and Gender

The first three factors that influence the auto insurance cost are credit history, age and gender. If someone has a low credit score, they are going to pay more for car insurance.

Young men are deemed the group that causes the most car accidents, which makes them high risk candidates to insure.

An insurance company looks at credit scores and determines whether a person is trustworthy or not. A high score means they are more trustworthy, which results in a lower premium offer. If you want cheap car insurance, work to improve your credit score.

Age and gender are two things you cannot control. If you are a young man, you are probably going to get high quotes for car insurance. Young men are deemed the group that causes the most car accidents, which makes them high risk candidates to insure.

Both men and women between 30 to 59 are going to pay less for insurance, but women pay a little less than men because they generally cause fewer accidents.

As you get beyond 60, auto insurance premiums may increase over time. This is because older individuals statistically cause more accidents than those people who are under 60.

Auto Insurance Cost: Driving History

A major factor that a lot of people ignore when it comes to the auto insurance cost is their driving history. If you have a history of safe driving, you will get offered plenty of low-premium auto insurance policies.

In contrast, someone who gets into a couple of accidents per year is going to end up costing the insurance company money, which means they are a high risk candidate.

Why is driving history important for getting good car insurance quotes? Because a person who has no accidents in the past five years is a very low risk candidate to an insurance company. They want to insure this person, because they will make money on them.

In contrast, someone who gets into a couple of accidents per year is going to end up costing the insurance company money, which means they are a high risk candidate. This corresponds with higher premium offers.

The best way to save money on insurance in the long-run is to avoid getting into accidents. If you are in a minor accident, consider paying for the costs out of pocket without contacting your insurance company.

Your insurance premiums are only impacted by accidents where you were deemed at fault. If the other party was at fault, it has no bearing on your driving history.

Auto Insurance Cost: Possible Discounts?

The auto insurance cost is not a fixed item. There are many ways to lower the amount of money you are paying for car insurance. Companies are happy to offer discounts for a variety of reasons.

Safe driving is always rewarded with a discount. For example, you can take a defensive driving class and get a discount on your premium from the insurance company.

For example, young people might have high rates because of their age. However, they are also entitled to discounts if they are getting good grades in high school or college. They may also get discounts for belonging to organizations such as MENSA.

Army officers and retired army members will always get a good discount from insurance companies. Sometimes you can get up to 15 percent off your policy if you served in the army or navy.

Safe driving is always rewarded with a discount. For example, you can take a defensive driving class and get a discount on your premium from the insurance company.

Another discount comes for people who add safety features to their car. Adding new airbags or a car alarm system will drive down your insurance costs.

Auto Insurance Cost: Paying Per Year or Per Month?

You may not realize, but you can get a discount on your car insurance if you are paying the premiums on an annual basis. Insurance companies are happy when customers get their policy paid at the start of the year.

Another benefit to annual payments is that you do not have to worry about your insurance lapsing if you forget to make a timely payment on a particular month.

In contrast, someone who pays on a monthly basis will pay more. While the difference is not huge on a yearly basis, it can easily add up during your lifetime. Even if you are only saving $100 a year by paying annually, you will end up saving thousands of dollars in your lifetime with this tactic.

Another benefit to annual payments is that you do not have to worry about your insurance lapsing if you forget to make a timely payment on a particular month. Completing the payment on a yearly basis is much less hassle.

However, there are other factors to consider when you are deciding between annual or monthly insurance payments.

If you simply cannot afford to pay all your premiums at one time, you should not try to force the situation.

Auto Insurance Cost: Shopping Around

One real way to cut down on the auto insurance cost is to shop around for a new policy on a regular basis. People make the mistake of sticking with one company for 10 or 20 years.

If your current provider sees that you are about to jump ship, they may offer you more incentives to stick around.

While it is nice to not worry about your auto insurance policy on an annual basis, it is a good idea to reassess every year. See if there are any good discounts being offered by other companies. Tell your current provider you are thinking about switching to another company.

If your current provider sees that you are about to jump ship, they may offer you more incentives to stick around.

Either way, you will emerge ahead. You have the option of going to a new company for a lower rate, or sticking with your current provider at a reduced rate compared to your current policy.

Shopping around is something you need to do even if you are very happy with your current policy. while your current policy is probably good, the alternatives might be even better!