You know about some of the things that can cause your auto insurance rates to skyrocket. So you try to avoid getting into accidents and fender benders, while striving to obey all traffic laws. That’s smart.
But you may be dismayed to learn that your premiums are determined by a whole array of factors, some of which may not make a whole lot of sense to you. Here are 10 of the most surprising factors.
- Gender. Okay, this may not be all that surprising, given all the rhetoric you’ve heard about “women drivers.” But here’s the shocking part: men are much more likely to get into an accident, so males will usually have higher auto insurance premiums than those of the fairer sex.
- Creditworthiness. Think those huge balances on your credit cards or that bankruptcy from a few years back don’t have consequences? Think again. Insurers have found a strong correlation between low credit scores and high crash rates – so people with bad credit tend to pay more for car insurance.
- Homeownership. This is somewhat related to creditworthiness; in insurance companies’ eyes, people who have strong enough credit to qualify for a mortgage are less likely to file insurance claims than those who can’t obtain a home loan. (However, with the recent spike in foreclosures, this factor may be deemphasized in the future.)
- Smoking. Is it because secondhand smoke somehow causes auto accidents? Not really. In addition to the health problems associated with smokers, auto insurers don’t like the fact that smokers sitting behind the wheel are using their hands to do something other than drive – and crash statistics reflect that.
- Wealth. It’s true. Figures show that lower income drivers are associated with more auto insurance claims. There are a couple of reasons for this: first, people with more wealth tend to be older, and older folks are usually safer drivers than younger ones. Plus, higher income people often live in better neighborhoods where crime (namely, auto theft) is less frequent.
- Occupation. Certainly, there is a correlation between income and insurance premiums. But there are certain professions which tend to experience more auto accidents, including lawyers (due to stress/fatigue), doctors (long hours/fatigue), realtors (more driving than normal), and club DJs (who drive at night).
- Marital status. No, a wedding band doesn’t have magical powers that improve driving ability. But studies have shown that married drivers get into fewer accidents than unmarried ones. One possible explanation is that married households are wealthier than their single counterparts (see #5.)
- Education level. Looking at many of the factors above, you could probably predict that level of education is inversely proportional to average auto insurance costs. After all, better jobs, stronger credit, and more wealth are associated with higher education levels.
- Grades. As a result, high school or college students can get premium discounts for earning good grades in school. Insurers feel that exceptional students will go on to complete more education. Statistically speaking, that will make them safer drivers.
- State of residency. So how can two people who have identical risk factors but live in different states pay widely varying auto insurance rates? Often, it’s because some states have more uninsured drivers than others (Oklahoma) which raises premiums for everyone else; other states have unique regulations or legal systems (Louisiana, Michigan) which jack up costs for insurers.