Insurance premiums are like airfares. They vary from company to company. And good luck trying to figure out how they are determined or why they change.

I don’t vouch for anything I am about to tell you. This article is based on what insurance industry representatives say determines the cost of your auto insurance.

They claim that many factors can affect your premium, including these:

    1. Your driving record.

    The better your record, the lower your premium. If you have had accidents or serious traffic violations, it is likely you will pay more than if you have a clean driving record.

    2. How much you use your car.

    The more miles you drive, the more chance for accidents. If you drive your car for work, or drive it a long distance to work, you will pay more. If you drive only occasionally — what some companies call “pleasure use” — you will pay less.

    3. Where your car is parked and where you live.

    Where you live and where the car is parked can affect the cost of your insurance. Generally, due to higher rates of vandalism, theft and accidents, urban drivers pay a higher auto insurance price than those in small towns or rural areas.

    4. Your age.

    In general, mature drivers have fewer accidents than less experienced drivers, particularly teenagers. So insurers generally charge more if teenagers or young people below age 25 drive your car.

    5. Your gender.

    As a group, women tend to get into fewer accidents and less serious accidents than men. They also have fewer DUIs. So, women generally pay less for auto insurance than men. Of course, over time individual driving history for both men and women will have a greater impact on what they pay for auto insurance.

    6. The car you drive.

    Some cars cost more to insure than others. Variables include the likelihood of theft, the cost of the car itself, the cost of repairs, and the overall safety record of the car. Cars with high quality safety equipment might qualify for premium discounts.

    7. Your credit.

    The insurance industry claims that credit-based insurance scoring predicts the likelihood of a person filing a claim and the likely cost of that claim. Credit-based insurance scores are based on information like payment history, bankruptcies, collections, outstanding debt and length of credit history. I wish they would share the evidence that they claim supports this.

    8. The type and amount of coverage.

    In virtually every state, by law you must buy a minimum amount of liability insurance. The state required limits are generally very low and most people should consider purchasing much more than the state requirement. If you have a new or recent model of car, you likely will also buy comprehensive and collision coverage, which pays for damage to your car due to weather, theft or physical damage to the car such as being hit by a tree. Comprehensive and collision coverages are subject to deductibles; the higher the deductible, the lower your auto insurance premium. While there is no legal requirement to purchase these coverages, if you finance the purchase of the car or you lease it you may be required by contract.

    So, how can you save money when you buy car insurance? That’s the subject of another article in this series.

    **This article is designed to provide helpful information that can be read within 2 minutes. It is neither a full explanation of this subject nor legal advice. To learn more, and to receive legal advice on which you can rely, contact me or another lawyer.

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