For example, your home or vehicle’s location may influence the rate you pay for homeowner’s or auto insurance. So will your commute or whether you use your car for business or pleasure.
Similarly, proposals that restrict insurers’ management of their health plans could have a significant impact on the cost of premiums.
1. Driving Record
Your driving record is a major factor when it comes to car insurance rates. Insurance companies take into account everything from minor violations to serious accidents on your record when determining the cost of your insurance.
In some states, a major violation can cause an insurance company to drop you or refuse to renew your policy. It also can have a lasting impact on your rate, even if it goes away after ten years.
In addition to your driving record, the type of vehicle you drive and where you live can impact your premium. For example, drivers in urban areas typically pay higher premiums due to the greater likelihood of theft and vandalism. Moreover, some vehicles are more likely to be involved in accidents than others, which is another factor that influences the price of your insurance.
2. Vehicle Type
The type of automobile you drive can have a significant impact on your yearly premium. Insurance companies consider factors like the cost of repairs, the likelihood of theft and the safety rating of a particular vehicle model when determining your rate.
Luxury cars, typically those with high market value and custom or foreign parts, have higher costs to repair and replace than more affordable models. This often results in a higher insurance premium.
How you use your car, as well as where you park it at night or during the day, can also influence your yearly insurance rates. For example, people who commute long distances for work are more likely to be in an accident than those who only drive their cars around town.
3. Age
Your age is one of the primary factors that life insurance companies consider when determining your premium rate. Because younger people have less chance of facing health problems and hospitalizations, their premium rates are kept low compared to those who are older.
The ACA has rules that dictate how much insurers can vary premiums based on your age. Most of the individual Affordable Care Act plans follow a standard age-rating ratio that caps the maximum you can pay at three times the rate charged to a 21-year old.
However, New York and Vermont do not use your age to determine your health insurance premium rates. In addition, Alabama, Mississippi and Oregon have state-specific age-rating rules that are more restrictive than the federal guidelines. Therefore, these states have higher premiums than the federal standards.
4. Credit Score
Credit scores are the basis for creditworthiness when lenders approve loans or deny them, and impact the rates of interest you pay on what you borrow. Insurers also use credit scores to determine how likely you will be to file insurance claims.
While both credit and insurance scores are based on data from your credit report, they differ in how they are calculated. Credit scores look at factors like your credit utilization, delinquencies, types of accounts and recent activity.
Groups including United Policyholders and Consumers Union have fought against the practice of insurers using credit to determine whether they will offer home or auto insurance, or at what rate. However, state insurance regulators have largely allowed the practice to continue.
5. Driving Habits
Whether you’re a veteran driver or brand new to the road, there are some habits that all drivers should repeat like a mantra each time they get behind the wheel. These good driving habits will not only keep you safe, but could also save you some money on your car insurance.
One of the most dangerous driving habits is speeding. It’s important to be mindful of the posted speed limit and adjust it based on traffic, weather, and road conditions.
Another bad habit is drowsy driving. Being sleepy decreases reaction times and impairs judgement, which is why it’s so important to get enough rest before you hit the road. Drowsy driving is especially dangerous for commercial drivers and young people. In addition, being on your phone, eating, adjusting the stereo or rubbernecking can all cause you to lose focus on the road.
