7 Things You Never Knew Impacted Your Car Insurance

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When searching for an auto insurance policy, there are things we expect will impact our rates: demographic details like age, home address, even credit score. But in the world of car insurance, there are still surprises, believe it or not. Below, you’ll find the top seven most surprising things that can impact your car insurance rates, taken straight from a comprehensive research report on the state of the auto insurance industry compiled by The Zebra.

1. Your History of Car Insurance — or Lack Thereof — Can Mean Big-Dollar Differences on Your Rate

If you’ve had a long history of insurance coverage, and if you’ve chosen policies with better coverage, you’ll pay less for your auto insurance. For example, in the case that you cause a collision that results in injury to another person, but you have higher coverage limits, that leads insurance companies to believe that you’re a more responsible person than someone else with a history of choosing the lowest possible coverage.

So what level of coverage do you need in order to see savings? The Zebra’s research shows that people with a five-year history of carrying $100,000 of bodily injury coverage per person and $300,000 per collision (often designated as “BI 100/300” in insurance documents) can expect to pay an average of $184 less per year for the same new insurance policy as someone with no history of insurance coverage.

Further, if you have any lapse in auto insurance coverage (even a few days), that can also cost you big time, as it indicates high-risk behavior to insurers.

Note: The only exception is for residents of California, which is the only state that doesn’t consider insurance history when determining average annual auto insurance premiums.

2. Insurance Companies Care Why You Drive

Do you drive solely to get to and from work? Do you use your car for business or to haul stuff around your farm? When you apply for your car insurance policy, the agent will ask how you use your vehicle, and your answer could have a big impact on your insurance rate. The Zebra found that prices can vary up to 18% depending on how a person uses their vehicle, even when every other detail stays the same.

People who use their vehicles on a farm will pay the least, while those who use their cars for business will pay the most for car insurance — up to $227 more each year. You can’t lie about what you use your car for, lest you risk a canceled policy, but you can make sure you tell the agent how you use your car when shopping for a policy to ensure you get the best rate (especially if you’re insuring a farm vehicle!).

3. Lying During the Application Process Can Cost You

It could spell trouble if you don’t disclose accidents and other violations when applying for insurance, The Zebra’s licensed insurance agent and expert Neil Richardson says. “Insurance companies don’t like dishonesty, so many times they will charge more for non-disclosed incidents. It pays to be honest about your driving history when you’re applying for your policy.”

4. Insurance Companies Care Whether You’re Coupled Up — & if You Aren’t, They Care Why

You might already know that married people pay less for their auto insurance policies than single folks (especially married men — a family makes men better drivers, it seems). But the rate differences became interesting when The Zebra looked at divorced and widowed people.

When a single person gets married, his or her rate will drop $74 a year, on average. Get divorced, and the rate goes right back to where it was. But if you’re married and your spouse passes away, your rates will also climb a little higher, though not as high as if you’d gotten divorced. It might not seem fair, but it’s all based on risk according to insurance company calculations.

Note: If you live in Hawaii, Massachusetts or Montana, insurers do not take marital status into consideration when calculating average annual premiums, so your policy won’t change because of it.

5. Not All Violations Are Created Equal When it Comes to Auto Insurance

Insurance companies don’t spell out exactly why there’s such a discrepancy among rates for each violation, but The Zebra’s research shows common violations vary widely — and vary among states. For example, speeding, causing a collision (“at-fault accident”), driving recklessly, racing or driving under the influence of alcohol will all raise car insurance rates at least a couple hundred bucks — and as much as several thousand. A DUI will raise rates more than 100% in seven states, more than 200% in Hawaii and more than 350% in North Carolina. And although DUIs increase average annual premiums the most nationally, 23 states cite racing as the costliest violation.

Further, penalties for various violations don’t appear to correlate closely with safety risk. Texting and driving can be as dangerous as driving under the influence of drugs or alcohol, but you’ll pay a lot more for your auto insurance if you’re caught doing the latter. The Zebra’s research found that a DUI will make a driver’s car insurance rate 3,200% higher than a texting-while-driving violation would.

6. Insurance Companies Factor Your Highest Level of Education Into Your Rate

The Zebra averaged savings across all 50 U.S. states and Washington, D.C., and found that, nationally, people with a bachelor’s degree save $32 more each year than people without a high school diploma. Keep in mind that this is an average, though, so depending on where you live, your degrees could have an even greater impact. In Delaware, for instance, a person with a PhD will pay $131 less than someone without a high school diploma, all else being equal.

Richardson says that customers are often surprised, and sometimes even offended, when asked about the highest level of education they’ve achieved, and some would choose not to disclose the information. But, says Richardson, “choosing not to disclose your education level can cause your rate to be higher because the default option for education level would be the lowest tier — a designation of ‘no high school or diploma.’”

7. How Long You’ve Had Your License Will Affect Your Insurance Rate

The length of time you been licensed to drive can also impact your rates, says Richardson, because this is a strong indicator of the amount of driving experience you’ve had. If you have been licensed for fewer than three years you will most likely pay higher rates than someone the same age who has been licensed for more than three years.

You might feel frustrated that many of the factors that determine your auto insurance policy rate are beyond your control (you can’t — or shouldn’t — get married just to save a few dollars on your auto insurance, for example). But it’s still important to know the details of how your insurer might determine your rate. This way, you can always make sure to ask the agent to consider every factor that might lower your rate when you’re shopping around (which you should do about every six months to a year).

Remember, your credit score can also affect your ability to qualify for car insurance. You can see where you stand by viewing a free credit summary on Credit.com.

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6 Car Insurance Discounts You Should Ask About

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Insurance is the costliest car-related expense for drivers after the vehicle itself (recently surpassing gas), so it’s no surprise that consumers seek discounts to reduce their car insurance rates. Car insurance companies spend exorbitant amounts of money each year on advertising, and they’re certainly not shy about promoting discounts that supposedly make them more affordable than their competitors. No accidents? Discount! Defensive driving course? Discount! Good student? Discount!

But do these discounts actually reduce what consumers end up paying? Or are they just fluff to make you feel better about shelling out for your premium? Does the degree of the discount really offer relief to your wallet, or could you end up actually paying more by chasing discounts with one company than you would with a company that offers fewer discounts but a lower rate on your premium?

You may also wonder how insurance companies determine your rates. It’s important to note that while factors such as age, marital status, education level and employment have an affect on your rate, they are considered rating factors and not discounts since they directly impact your rates as determined by insurance companies’ unique pricing algorithms.

Here, we’ll discuss some common car insurance discounts, how difficult they are to qualify for and if they really make a dent in what you pay.

1. Anti-Theft Discount

If your vehicle has some type of alarm (in most cases it can be a factory alarm or aftermarket product that you may have added), most car insurance companies will offer a discount on your auto policy. This particular discount can be easy to verify because most new vehicles with a factory alarm can be identified using your vehicle identification number (VIN). This discount is normally fairly small, just a few percentage points off of your premium.

2. Defensive Driving Discount 

This is one of the most misunderstood discounts offered by auto insurance companies. Unfortunately, drivers are often told with a degree of certainty that they will get a discount after completing a defensive driving course. But this just isn’t true in a lot of cases. Yes, there are some insurance companies that will offer any driver a discount for completing a defensive driver course, but most companies have stipulations on how you may qualify. Chances are high that you can only apply the discount if you are 55 or older, have a clear driving record, didn’t take the course as a court-ordered requirement or live in a certain state.

Because you must pay for the course before completing it, you should always call your insurance company to check if they offer a discount for completing the course, what the stipulations may be and what percentage of a discount you’ll receive. Even if you do qualify for the discount, the cost of the course compared to the amount of the discount may tell you it’s not worth the time — or hassle.

3. Good Student Discount 

Young drivers are some of the most expensive to insure due to their lack of experience behind the wheel, and whether parents add their teen to their policy or a young driver secures his own coverage, the rates will be high. Insurance companies often offer discounts for good students, helping to offset the high costs of insuring a young driver who’s still in school. Commonly, a student (whether in high school, undergraduate or occasionally graduate programs) has to maintain a 3.0 GPA or better to qualify — and proof is generally required in the form of a report card, transcript or Dean’s letter.

Still, as is the case with insurance pricing, the good student discount varies by company, state and other circumstances. Certain insurance companies will only offer the discount if the student is listed on a parent’s policy; others will offer it only if the student is covered on his or her own separate policy; others don’t offer a student discount at all. Your best bet is to contact your insurance provider and ask about the discount, as it is normally a significant percentage.

4. Homeowner Discount

A homeowner discount is quite literal, though the discount will vary based on the type of residence, be it a single-family home, condominium or a mobile/manufactured home. Simply let your insurance company know you own your residence (and what type of dwelling it is), and they’ll let you know how the discount will affect your rate — it’s normally fairly hefty. You’ll also have to submit proof that you own your home, such as a home insurance policy, tax statements or a deed.

The homeowner discount is completely separate from the bundle discount that many insurance companies now offer for insuring your home and car through the same company, which is another great way to lower your rates. The bundle also benefits renters who purchase renter’s insurance through the same company.

5. Multi-Vehicle Discount 

Another simple-but-helpful discount may apply for multiple vehicles covered on the same policy. With auto insurance, there is a base cost of each policy that has nothing to do with your actual coverage. (In addition to rating factors, insurance pricing is affected by the company’s own level of financial solvency and overhead costs like paying employees.) If you were to insure two vehicles on two separate policies, then you would be paying two base costs. Combining those two vehicles on one policy allows the insurance company to offer a discount and you avoid paying multiple base costs. It’s a win-win scenario. (Note that additional household members will need to be listed.) This discount can be fairly significant and is easy to get — in most cases, it automatically applies when you add a vehicle to a policy.

6. Proof of Prior Insurance Discount (POP) 

One of the largest discounts applies for drivers who maintain their prior insurance coverage until starting a new policy. Gaps in insurance coverage are not good for your rates. Insurance is all about risk, and auto insurance companies see a driver with existing coverage as a much lower risk. Therefore, they are willing to offer hefty discounts to entice those drivers to switch companies for lower rates. The POP discount is fairly simple to qualify for in most states and only requires you provide proof that you were insured without any break or lapse in coverage for at least six months prior to starting your new policy. (California is the exception — it does not allow insurance providers to offer this discount.)

Seeing Through the Discount Fog

It’s easy to get sidetracked by all the persuasive “money-saving” advertising insurance companies put out there, but being a smart and informed shopper will help you cut through the fog. Do the research so you can answer the following question: How much is this particular coverage from this insurance company going to cost me? If discounts make it the best deal for you, great, but it’s also a real possibility that you can find a rate that fits your budget without them. Discounts and low rates aren’t always mutually exclusive, even if the TV ads say otherwise.

Remember, it pays to read the terms and conditions carefully on any financial paperwork so you can find the deal that’s best for you. It can also help to have a good credit score, since it may qualify you for better rates on auto loans, for example. (You can see where your credit score stands by viewing your two free credit scores, updated monthly, on Credit.com.)

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