7 Surprising Factors That Affect Car Insurance Rates

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Your car insurance quotes are supposed to reflect your chances of having an accident or making a claim. People who drive like speed demons should pay more, right? But in reality, the factors that affect car insurance rates could leave you scratching your head.

You may not realize that the following seven factors can affect what you pay for coverage. (Some states ban the use of one or more of these factors in insurance pricing, so they may not all apply where you live.)

1. Whether you pay your credit card bills on time

Your credit has a huge impact on your car insurance rates. A driver with poor credit might pay more than twice as much for car insurance as a driver with excellent credit, according to a recent NerdWallet survey. In fact, poor credit can affect rates significantly more than a DUI conviction. Drivers with average credit also tend to pay more than those with excellent credit.

[Compare car insurance quotes through NerdWallet’s Car Insurance Comparison Tool.]

Insurance companies price policies using special credit scores called insurance scores, which are a little different from the credit scores used by credit card issuers and other lenders.

In a discussion of credit scoring on its website, the Insurance Information Institute, an industry trade group, states, “Actuarial studies show that how a person manages his or her financial affairs, which is what an insurance score indicates, is a good predictor of insurance claims. Statistically, people who have a poor insurance score are more likely to file a claim.”

2. The death of your spouse

Insurance companies say marital status correlates to risk. Married people tend to have fewer insurance claims and therefore usually pay less for car insurance than single folks. This judgment even extends to people who have lost a spouse, according to a July 2015 report from the Consumer Federation of America. The group said that four out of six major insurers apply a “widow penalty” by boosting car insurance rates by an average of 20% for people who become widowed.

3. Whether you graduated from college

Drivers with more education generally pay less for car insurance.

For example, an Oregon driver without a college degree would get quoted a car insurance rate that is 20% higher on average than someone with a bachelor’s degree, a NerdWallet analysis found.

Similarly, Liberty Mutual quoted high school graduate rates averaging 10% to 13% more than those for college graduates in Baltimore, Houston, Phoenix and Hartford, Connecticut, the Consumer Federation of America reported in 2013.

4. Your job

The insurance industry also says that drivers with certain occupations are more likely to file insurance claims. But consumer advocates say insurers charge people with higher-status jobs less because they want customers who will buy higher levels of auto coverage and other policies.

Geico quoted insurance rates for a factory worker in Hartford that were 28% higher than rates for a factory superintendent, according to the Consumer Federation’s 2013 report. Liberty Mutual quoted an Oakland, California, factory worker rates that were 20% higher than those for an executive.

5. Whether you own your home

Some companies, including Travelers, give homeowners a price break on car insurance. You don’t have to buy your homeowners insurance through Travelers to get the car insurance discount, although you can get additional savings if you buy multiple policies with the company, similar to most other insurers.

6. Your grades

Good grades can help you succeed in life and pay off in lower car insurance rates. Most insurers offer discounts to young drivers who meet at least one of these criteria:

  • Have at least a 3.0 grade point or “B” average
  • Make the dean’s list
  • Make the honor roll
  • Are home-schooled and score in the top 20% on an acceptable standardized test, such as the PSAT, SAT or ACT

Insurers have found that grades correlate with driving risks. A 2003 study published in the journal Accident Analysis and Prevention, for instance, found that students with a C or D average were 49% more likely to get into an accident within their first year with a driver’s license than those with an A or B average.

7. Whether your insurer thinks you will shop around

You might expect your car insurance company to reward your years of loyalty with discounts. But some insurance companies try to predict which customers are the least likely to switch insurers and squeeze more profit from them through rate increases. An increasing number of states — including California, Florida and Ohio — have banned this practice, dubbed “price optimization.”

No matter which of these factors applies to you, it’s a good idea to shop around from time to time. NerdWallet’s car insurance rate tool can help with that.

Aubrey Cohen is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @aubreycohen.

Image via iStock.

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