I received an interesting email a few weeks ago from an agency called Autoinsurance.org, a free online resource for anyone interested in learning more about car insurance. On this site you can compare insurance rates from different insurance companies for free. I visited the website, but I didn’t do so to compare rates, but rather because the person who emailed me asked an interesting question – he wrote: “You could be the best driver in the world and have the cleanest driving record, but still be charged more because…” then added several factors that go into insurance rates. This website provided much of the information for this article.
All drivers need insurance — it’s required by law. So how are the rates we pay determined? Are the prices fair? What are some of the non-driving factors that determine what we pay?
When I moved to Malone in 1975, my insurance premiums dropped dramatically. Nothing has changed except the move from the Utica area to Malone. So where you live affects the rate you pay. A driver’s zip code is one of the most crucial unrelated driving factors insurers use to calculate rates. There are a multitude of reasons behind this factor. A driver may live in a crime-prone area, which makes their car more susceptible to being stolen or vandalized. Or they may live in a busy area with an above average accident rate.
Age is another common factor insurers use to determine rates. Although it may not initially seem related to driving, insurers base their rates on age, claiming that the more experienced drivers are, the less likely they are to have an accident. The result is that older and younger drivers are often charged more, especially teenagers. However, some of this age discrimination is based on crash data, as insurers look at crash patterns by age.
Some insurers also use credit scores as a factor in their rate calculations. Drivers with a lower credit score will have slightly higher rates than drivers with a high credit score. The underlying reasoning is that drivers will be more likely to make payments on time if they have a high credit score.
Your profession and education are used together to determine how much you will pay. Professionals in skilled positions and executives who have finished college tend to pay less for insurance than entry-level workers or blue-collar workers who only have a high school diploma. The Consumers Federation of America did an analysis to show that most major insurers charge their customers less education and lower employment status at higher rates.
While a few states have banned insurers from using gender to determine auto insurance rates, many insurers still do. Men often have higher rates than women, as crash data from sources such as the Insurance Institute for Highway Safety often shows that men are more likely to be involved in a fatal accident than women. However, many argue that basing rates on gender is outdated and that drivers should be charged based on their driving merit, not their gender.
Determining insurance rates may or may not be fair, but at least the rates-based costs are backed up by statistics. However, while many non-driving factors are beyond your control, driving safely and maintaining a clean driving record can help you save on car insurance. It can also save your life.