Car Insurance Pricing: What’s Under Your Control?

December 19, 2011 No Comments »


Most of us buy the car we “want,” “deserve,” or “think we can afford.” It isn’t until later that we actually worry about the related insurance costs.

But is there a way to be proactive and buy a car we know will give us the best shot at saving on auto insurance? Put simply, yes.

There are too many factors included in insurance pricing and too many insurers, all with different car insurance rates, to simply pick an individual car as a winner, but there are some guidelines to keep insurance costs low.

[Compare rates from the leading car insurance companies in your area.]

As you’ll see, some insurance premium factors can be controlled…and some cannot. Let’s take a look at examples of both.

Pricing You Can Control

How much you pay for car insurance, just like anything else you buy, is somewhat determined by personal choices. This includes your vehicle, desired coverage, driving history and credit history. Follow the recommendations below if your goal is to snag cheap car insurance.

Your Vehicle

One of the biggest choices we have is which car we choose to drive. Here are some tips on the type of vehicle your should consider if your main goal is cheaper insurance coverage.

Buy Cheap – this is the best way to get cheaper car insurance. As a general rule, the less your vehicle costs to repair or replace, the less you pay to insure it.

Older Cars – the older your car, the less it should cost to insure (classics excluded). Older cars often don’t require physical damage coverage (comprehensive and collision). It simply doesn’t make sense to pay extra for this coverage if you’re not going to get any money from the insurer if you car is damaged or totaled. So going with liability-only car insurance could save you some money.

Note: If you lease or finance a vehicle (of any age), your lender will require this coverage to protect their financial interest in your car. The lender is considered the loss payee on the policy.

Base Model – go for the base model. If you opt for a “sport” model, the “luxury” edition or a convertible, your car insurance costs will skyrocket. See “buy cheap” above.

[Do red cars cost more to insure?]

Buying the right car is only a small piece of the puzzle. Let’s address some other pricing factors that are under your control.

Your Coverage

The type of car insurance coverage you desire and corresponding policy limits are going to come into play. We already discussed the lender/lessor requirement for full coverage (including physical damage), but what else matters?

Liability Limitsstate minimum car insurance coverage is usually the cheapest, although some insurers discount higher liability limits, as they believe an individual seeking better coverage may be a more responsible overall driver.

No Fault Coverage – your premium will increase if you opt for personal injury protection or medical payments coverage on your policy.

Ticket/Accident Forgiveness – if you are the type of person who likes to pay for additional insurance on top of your existing insurance, ticket forgiveness and accident forgiveness may be for you. But it’ll cost you.

Roadside Assistance – insurers love to add roadside assistance and towing coverage to your policy. While it will certainly help if the need for this coverage comes into play, you’ll pay a little extra for it. For the record, Allstate’s free lifetime membership in their Good Hands Roadside Assistance program is only free if you don’t actually use the services…only “membership” is free.

Driving Habits

Your personal driving habits can be the difference between dirt-cheap and ultra-expensive coverage. Buying a 1995 four-door Honda Civic with 1,000,000 miles will not do you any good if you have prior insurance claims and driving infractions on your record.

Your insurer will likely run your MVR to verify your driving record and a C.L.U.E. report to validate your claims history. Expect a higher overall premium if either of these reports return recent “activity.”

(How much does insurance go up after an accident or ticket?)

Credit History

The cheapest car insurance available these days is afforded to those with the highest credit scores. While not every insurer evaluates your credit history, known as an insurance score, you can certainly expect to pay more if your history is shaky.

For the record, insurers who don’t review credit are typically more expensive than those who do. Although this option will likely be your best friend if you’ve had some credit hiccups in the past.

[Car insurance and credit scores]

Pricing You Can’t Control

Let’s take a moment to look at some car insurance rating factors that may not necessarily be under your control, no matter who you go with.

Age and Gender

Both your age and gender come into play when it comes to insurance pricing. Car insurance for teenagers is typically much higher than that of more mature drivers (for obvious reasons).

And if you are a male teenager, you can expect to pay more for coverage than your female counterpart.

Your premium is also dependent on where you live. Not only by state, but whether or not you live in a densely populated area is also taken into consideration. The higher the population where your car is garaged…the higher the chance you’ll be involved in an accident…and the higher your car insurance premium.

By the way, Michigan has the highest car insurance costs.

So hopefully you’re not completely lost. If you find the above information mind-numbing, your best bet is to compare car insurance quotes online (to get an idea of pricing) and/or speak with a local independent insurance agent who can shop your rate based on your unique needs.

Read more: Top 10 cheapest cars to own and insure.

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