Factors Deciding Car Insurance Rates

These days it is more important than ever to carry auto insurance-most states require minimum coverage by law. Finding ways of keeping car insurance rates affordable is increasingly important. There are several factors that determine what insurance will cost drivers. Understanding these factors will help consumers compare car finance rates and select the best deal for their money.

What Affects My Insurance Costs?

Many factors cause the cost of insurance to rise. Some of these factors are out of the consumer's control, but many are well within the consumer's control to help them maintain their costs of insurance. Being aware of these factors can help you keep the cost of insurance down.

Driving Record

Maintaining a good driving record keeps the cost of insurance down. If you have no moving violations or accidents on your driving record, your cost of insurance will be low. In most states the statute of limitations on moving violations is three years, so if you just got a speeding ticket, expect your insurance rates to go up. Keeping a clean driving record is one of the best ways to keep your cost of insurance low.

Age

The younger you are, the higher your insurance is, because the more likely you are to speed or get into an accident. The idea is that the longer you've been driving, the more experienced driver you are, and therefore are less likely to have an accident. Normally once the insured turns 25, insurance rates drop.

Location

Where you live affects how much you are charged for insurance as well. Some states, like California, are notorious for high costs of insurance, while Midwest companies offer low car insurance rates. Additionally, your rates will also rise depending on how much you drive, how far away from home you travel, whether you drive out of state on a regular basis, if you use your vehicle for business or commercial work, etc. If you've moved, changed jobs or careers that involve fewer miles traveled, be sure to call your insurance company and see if you can benefit in a lower rate.

Type of Car

The kind of vehicle you choose to purchase has an impact on your cost to insure it. The price of the vehicle, safety testing, whether it's new or used-all of these factors determine the cost of insurance. For example, an expensive sports car will demand far higher insurance costs than a mid-priced Sudan; used car insurance rates are often lower than new car insurance rates. In most states, insurance companies conduct safety testing on every vehicle manufactured to determine how well the car will hold up in case of an accident. Safety features, materials, body design, size, and many other factors are tested, and the results are used in determining the costs to insure each vehicle.

Credit

Unbelievably, your credit is a crucial factor in determining how much your insurance will cost. For decades, insurance companies have been using credit scores as a guideline in determining what kind of a risk the prospective insured will be to them. According to the Insurance Information Institute, insurance companies have been using credit scores to determine cheap car insurance rates since the Fair Credit Reporting Act was enacted in 1970, claiming that it helps them accurately measure risk. Even studies that date back to the 1940's support the claims that credit is a good indicator of risk. Keeping your credit score high is one of the best ways of maintaining a low cost of insurance.

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