At the beginning of the week, I began thinking of what I wanted to write about that relates to auto insurance. So, I kicked back and called up several agents and asked, "What's the #1 question you get pertaining to automobile insurance?"....I was hoping I would get answers like, "What is a deductible?", "How much coverage do I need?", "Is my cousin who lives with me covered when he drives my car?"....Needless to say, I did not hear any of those in response to my question. Without a doubt, the #1 response I received was:
"How much does it cost?"
That seems like an extremely obvious response. Of course, people would ask how much it cost. I mean it's not like you're able to get it for free, so obviously, before I pay for something I would like to know how much it's going to cost. However, this was the most asked question before any discussion of the policy details or other determining factors took place. Let’s get one thing straight….Insurance is a game of statistics. This statistical game is played by what we call “actuaries.”
Actuary = A person who compiles and analyzes statistics and
uses them to calculate insurance risks and premiums.
Insurance companies do not care about “being fair.” What they do care about is trying to predict whether or not you’re going to cost them a lot of money!
So, here are 4 factors that have the largest impact on how high or low your automobile insurance rates will be:
Number 1 - Driver Age
If you’re between the age of 16-25 or 65+, I'm sorry, but statistically speaking you’re more likely to have an accident and will be subject to higher rates on your automobile insurance. When the driver hits age 25, the likelihood of an accident levels off until age 65 where the gradual increase in likelihood rises again.
I know some of you may drive like you’re hauling a load of eggs while constantly maintaining the speed limit wherever you go and for that I'm sorry….I’m sorry your fellow peers in your age range have to ruin it for you.
Number 2 - Sex
Again, statistically speaking, Females are better drivers than men. This is taking many different factors into account, such as time of day the person is driving, average miles traveled, alcohol involved and more.
Marriage is another interesting bit to take into account. Disregarding the gender, married people receive lower auto rates because they are deemed less likely to have an accident. If this doesn’t make much sense, think about it like this. On a Friday or Saturday night, who is more likely to be out late driving? A married male/female, or a single male/female?....Answer = Single male/female. The reason behind this? My opinion is that I highly doubt a married male/female is going to be out late partying….If they are, they probably have more to worry about than how high their auto insurance rates are.
If this seems unfair to you, Progressive offers their famous “snapshot” tool which plugs into your car and monitors your driving. That way, the statistics of your peers are not factored into your auto insurance.
Number 3 - Driving Record
Look, I'm not sorry about the high rate you received on your auto insurance when you’ve got 3 speeding tickets in the past 3 years. Stop driving so fast. Even if you’ve never had an accident, the insurance company still looks at the likelihood of you having an accident in the future. Trust me, if you are constantly driving fast, not stopping at stop signs, running through red lights or whatever, you are steadily increasing your likelihood of an accident and that’s a risk the company is not going to be willing to take. Also, if you have a sketchy driving record, a company that is rated A++ won’t even give you a rate for your insurance. Then you’ll be stuck with a sub standard company where price may sound good, but if you had an accident, then your claim experience would be less than ideal I can promise you.
Number 4 - Vehicle Type
The vehicle that you’re looking at is a Mercedes-Benz G-Class SUV. Otherwise, know as a “G-Wagon.” According to the Mercedes-Benz website, the MSRP for one of these bad boys starts at $122,400. That’s just $100,045 more expensive than the Honda Accord with an MSRP of $22,355. Using common sense, which one would be more expensive to fix if you got into a wreck???.....I hope you said the G-Wagon. In fact, I have a blue arrow pointing to the front bumper in the picture. To replace that bumper in the event of an accident will run you anywhere from 3-5 grand! You think the insurance company is going to be light on your rate given the amount that they would have to pay in the event you had an accident???....Not likely. This is probably an obvious assessment for most people, though. Let’s look at another vehicle.
Remember that Honda Accord??? Yep, that’s the most stolen vehicle in the nation as of 2015! Especially if you have a 1996 model by chance. So here we are again, STATISTICS! The front bumper on a Honda Accord is not that expensive at all to replace. However, if the insurance company is having to replace the whole car because it was stolen, then that’s a different story!
So what do you drive???....Well if you’re worried about your car getting stolen, then maybe you should look into getting a Nissan Leaf. One of the LEAST likely cars to be stolen.
Weigh out your options and educate yourself!
Thanks for reading,
Want More Information?
- Williams, A. F., & Carsten, O. (1989). Driver age and crash involvement.American Journal of Public Health, 79(3), 326–327.