Inflation has touched everything, from food prices to the cost of auto insurance. Here’s what might be driving the cost of your policy up.
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According to the J.D. Power Insurance Intelligence Report, over the first six months of 2023, the number of households that own a vehicle but don’t carry auto insurance rose to 6.49 million. As AutoBlog points out, that’s like every household in the cities of Detroit and Nashville canceling their auto insurance.
While we don’t know for certain why any of these households drive without insurance, it’s easy to suspect that it has to do with the increasingly prohibitive cost of auto insurance — particularly among those who’ve made a driving mistake or two.
Here’s a rundown of the most common mistakes that drive insurance premiums upward.
1. Driving carelessly
Like any business, even the best insurance companies want to make a profit. The riskier an insurer perceives you to be as a driver, the more likely it is that you’ll pay an inflated rate. In part because your insurer assumes you’re more likely to make a claim than a driver with a clean record.
So, if you have any accidents, speeding tickets, or other traffic violations on your driving record, you can expect to pay a higher rate until your insurance company deems you a lower risk. Typically, that will take three to five years as long as your record remains clean during that time.
Takeaway: Becoming a careful driver means not having to pay expensive tickets and also leads to lower insurance rates.
2. Driving a high-end vehicle
If you have a clean driving record, the cost of your insurance policy may come down to the type of vehicle you drive. Generally, the more expensive it is to make repairs to a car, the more expensive the policy will be. In other words, a late model, high-performance, high-value vehicle costs more to insure than a mid-price model with few frills.
Takeaway: While it’s supremely cool to drive a car that makes your heart beat a little faster, it also typically leads to higher insurance premiums. If you’re serious about getting your rates down, consider driving a safe car that’s cheaper to insure.
3. Being young
It’s possible that you’ve never made a mistake that would lead to higher rates. You’re simply young. According to the Centers for Disease Control (CDC), the risk of a vehicle accident is higher among teens from the ages of 16 to 19 than any other age group. In fact, drivers in this age group are involved in fatal crashes nearly three times more than drivers in other age groups. To protect against potential loss, insurance companies require teen drivers to pay a higher price for coverage.
Takeaway: You can’t do anything about your age, but you can drive carefully enough to maintain a clean driving record until you’re a bit older and able to qualify for lower rates.
4. Being single
Again, it’s not a mistake, but if you’re unmarried, you probably pay a higher premium than a married person with the same driving record as you. It’s all about statistics. Premiums are almost always higher for single drivers than for married drivers. Car and Driver breaks down factors insurance companies believe to be true:
Married couples are more likely to own a home and bundle insurance policies.With the potential of two incomes, married couples are likely to have greater financial security.Married couples are also likely to own more than one vehicle and qualify for multi-driver discounts.Insurers assume that married couples split driving duties and, ultimately, spend less time behind the wheel than single drivers.
Takeaway: If you don’t already bundle insurance policies, now’s the time to look into it. If you don’t own a home, see about bundling a renters policy or life insurance policy with your auto coverage. And if you don’t rack the miles up in your car, talk to your agent about a low-mileage discount or consider switching to a pay-per-mile policy.
5. Having a low credit score
In all but four states, drivers with low credit scores pay more for auto insurance than drivers with high credit scores — sometimes twice as much. Insurance companies justify the move by pointing to studies that show drivers with low credit scores make more claims.
Takeaway: It doesn’t happen overnight, but it’s possible for anyone to raise their credit score. Take steps to give yours a boost.
6. Living in a high-risk area
Where you park your car at night matters. Let’s say you live in an area prone to wild weather extremes. Insurers assume you’re more likely to make a claim due to storm damage and increase your rates. If you live in an area where vandalism and car thefts are a norm, you’ll also face higher rates.
Takeaway: If there’s no plan to move, talk to your insurance agent about ways to minimize risk to your car. For example, if your vehicle is always protected from the elements by sitting in a garage, let your agent know.
7. Racking up miles on your car
Who would think that the number of miles you drive could impact your checking account? And yet it does. Statistically speaking, the more miles you drive a year, the more likely you are to be in an accident. Insurers hedge against that by raising the rates on those who spend the most time behind the wheel.
Takeaway: If possible, share the driving duties. For example, if you’re driving an hour or more to work each day, look for someone to carpool with. Once you’re driving less, let your insurance agent know so your rate can be adjusted.
No matter why your rates are higher than you wish they were, take the time to look into every potential discount offered by your insurance company. And if your insurer doesn’t offer many discounts, it may be time to shop around for another company.
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