Why am I paying $1,800 a year for car insurance when my neighbor, who has newer cars, is only paying $1,200?
As insurance agents this is a question we receive on a weekly basis. Insurance is not the same for everyone, and understanding the reasons why is important. While you pay one amount, your neighbor pays another, and your brother across town pays something completely different. So, what gives?
Believe it or not, insurance rates are not arbitrary numbers dreamed up by guys in suits at some insurance company conference table; but rather they are carefully thought out calculations. The bottom line is that insurance premiums are determined by a multitude of factors and algorithms that sometimes even us agents have a hard time understanding.
Here are some common factors that determine your auto insurance rates:
- Your driving history. Claims and tickets in the last 5 years?
- Number of drivers vs. number of vehicles. More drivers than vehicles?
- Age and experience of listed drivers in the household. Youthful or elderly?
- How your vehicle is used: pleasure vs. commuting vs. business
- How many miles a year?
- Age of your vehicle.
- Safety features included in your vehicle. Anti-theft? Blind spot warning? Lane departure?
- Statistics regarding theft of your vehicle type. Is your vehicle a high theft target?
- Where you live. The number of thefts or uninsured drivers in your community.
- Your current insurance coverage limits. Previously carrying a lower limit increases your rates.
- How long you have been with your current insurance company? Loyalty programs exist.
- How long you have been continuously insured. Lapses in insurance will increase your rates
- Are you a homeowner or renter? Combining policies can provide a multi-policy discount.
- Your Insurance score. A combination of credit history and insurance history
- Do you still carry physical damage coverage?
The list goes on….
So why is it important for you to know this?
Well, because there may be some factors that you can control. While you can’t control your age, for example, you can control your driving record, your credit score, the type of vehicle you drive, and the coverage you carry.
Also, each insurance company weighs risks differently. For example, some will rate youthful drivers more competitively than others. That’s where independent insurance agencies shine. With access to multiple insurance carriers, independent agents can find the company that is priced competitively for your unique combination of factors.
At the end of the day, a major part of our job is to educate our clients so that they have the ability to make informed decisions. You don’t need to be an insurance expert by any means, but you should at least be given the opportunity to understand what is determining your insurance costs and how you can mitigate them.
Be an educated consumer - talk to our agents at Manzi Insurance and get informed.
Purchasing the wrong insurance can affect every day for the rest of your life. Keep that in mind the next time they tell you to save 15% in fifteen minutes.