Car insurance, and any other type of insurance, are one of those bills that we particularly dislike paying; after all, we may never actually need to cash in on all those premiums we pay year in and year out. But, should we ever need it, we are sure glad we had it. Very few of us could cover the potential sky high costs associated with auto accidents. You may be curious how rates are calculated, and here are some of the major factors insurance companies use to determine your premiums.
Men generally are charged more for auto insurance than women; a recent US study found that over the course of their lifetime, males paid more than 15,000 dollars than women for car insurance. While this may not seem fair, statistics suggest men present a higher risk and as such, carriers may charge more—after all, their whole business is about assessing risk and if someone is more likely to actually need the insurance, the company expects him to pay more for it. Some countries in Europe recently made legislative changes that forbid insurance companies to base rates on gender, but in the US and Canada, it does not appear any change is on the horizon.
Age is another major factor in determining rates, and will have a particular impact for those between 16 and 25 and those 65 and older. The former group has a much higher accident rate and premiums reflect that; males in this age range will have much higher rates than females. Once you hit 26, provided you have a good driving record, your rates will really not be affected by your age, until you reach senior citizen status as this group has a higher rate of accidents as well.
Some insurance companies also take your credit score into account when determining insurance rates. While your relationship with money may not seem like a relevant factor when it comes to how much you should pay for auto insurance, studies have found a correlation between lower credit scores and number and dollar amount of claims. While there are plenty of people with poor credit that may be amazing drivers and people with perfect credit who drive terribly, as long as statistics support the idea that someone irresponsible with their finances may be irresponsible on the road, it is probably a practice that some carriers will continue to partake in.
Whether or not you are married, level of education and your job can also affect your insurance rates. A US study found that a college-educated professional married woman who owned her home paid 68 percent less for her car insurance than a single woman with a high school diploma who rented her home in a moderate-income area. This was even the case despite the fact that the second woman had good credit and 15 years with no accidents. Where you live can also affect your premiums, as some places are more likely to experiences incidences of theft and vandalism.
Kelli Cooper is a freelance writer who covers all things insurance; if you are shopping for auto insurance in Canada, she recommends you check out the quote comparison services at Kanetix.