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What Determines My Car Insurance Rate?

auto insuranceWe all have a budget in mind, for the amount we’d like to spend on our car insurance premiums. This is often based on our overall monthly budget, our confidence as drivers, the amount of insurance we would like to purchase, and our own tolerance for risk.

Of course, insurance companies have their own method of computing your car insurance rate. For the most part, it’s based on their assessment of your risk level, or the likelihood that you will file a claim. But there are many different factors which impact your risk level, and therefore your rate, such as:

Basic information – your age, gender, and marital status are all considered when determining your risk level. Naturally, you don’t have a lot of control over your age or gender. And while married people generally have slightly lower car insurance rates, you probably won’t get married just for that benefit.

Your driving record – a poor driving record, including items such as speeding tickets, accidents, or DUIs, makes you a higher risk. Therefore, your car insurance rates will be higher. While you can’t change the past, you can protect your driving history in the future by being more careful.

Geographical location – Since you’re more likely to be involved in a car accident in a densely populated urban area than a rural location, your rates might be higher if you live in a big city.

Your car – Obviously, more expensive cars cost more to insure. But insurance companies also look at a vehicle’s scores on crash tests. Those that hold up better in an accident will get you a break on your insurance rates.

Your insurance history – Those with a gap in insurance coverage are gauged to be a higher risk, so be prepared to pay a little more when you first purchase coverage again.

Your credit score – A low credit score can cost you money on your car insurance rate, whereas a good credit score can earn you a bit of a break.

Your driving habits – If you commute through heavy traffic five days per week, you’re more likely to get into a wreck than someone who only occasionally uses their vehicle.