Customers often ask me, "Why does my friend's car insurance cost so much less per month than mine?"
To answer that intriguing question, let's dive into a comparison of the two insurance policies. First and foremost, we need to check if the liability coverage limits are the same. Are both policies equipped with collision coverage and comprehensive coverage? If so, what are the deductible amounts for each?
But hold on, there's more to it than just the policy details. In the realm of car insurance, pricing is influenced by a myriad of factors. Each insurance company has its unique way of assessing risk, which can lead to significant variations in premiums.
Why is my car insurance so high
As we all know, past accident histories and traffic tickets can have a significant impact on car insurance rates. Let me break down how specific accidents and tickets can affect your premiums in the realm of car insurance.
First off, accidents where you were at fault within the past three years can have the most dramatic effect on your insurance costs. And if those accidents involved not just property damage but also injuries to others, the impact is even greater. The influence of accidents diminishes over time, and for most insurance companies, accidents older than three years no longer affect your rates. On the other hand, if you weren't at fault in an accident, it may have little to no impact on your insurance costs.
Now, let's talk about tickets. Not all tickets will hike up your insurance rates. Parking violations, such as illegal parking, overstaying a meter, or missing a toll on a toll road, typically won't affect your insurance. Neither will a ticket for running a red light caught by a red-light camera.
However, it's the "moving violations" that can really jack up your insurance rates. These are the tickets you get when you're pulled over by a police officer, asked for your license and vehicle registration, and cited for speeding, running a red light, failing to stop at a stop sign, or other driving infractions. But if you manage to keep those violations off your driving record through legal means or otherwise, they won't impact your insurance rates.
Even more seriously, if you're caught in severe violations like driving under the influence (DUI) or reckless driving, you'll face steep fines, license suspension, or even jail time. And these violations will deal a heavy blow to your future car insurance rates. Many insurance companies will refuse to cover drivers with major violations within the past five years. And those that do accept you will charge you a premium price.
So, drivers, don't take any chances. Following traffic rules is not only a respect for your own and others' lives and property but also a way to save yourself money in the long run.
Past insurance records
If you're purchasing a car in the United States for the first time and don't have a prior insurance history here, your initial car insurance rates might be on the higher side. But just having a past insurance record doesn't necessarily mean you'll get a steep discount.
In a driver's insurance history, multiple gaps in coverage or frequent changes in insurance companies—like switching three or four times in a year—can be red flags for higher rates.
I've encountered quite a few car owners, especially students, who cancel their insurance during summer breaks when they return to their home countries and then reinstate it upon their return. This practice might seem practical, but it can actually lead to big trouble.
First off, most states in the U.S. require drivers to maintain a minimum liability insurance. Take Pennsylvania as an example: canceling your insurance can result in penalties including a fine of at least $300, a three-month suspension of your vehicle registration, a three-month suspension of your driver's license, and fees to reinstate your registration or license.
To avoid penalties while canceling your insurance, you'd need to surrender your license plates to the DMV and retrieve them when you're ready to drive again. But retrieving the plates also involves paying a fee to the DMV.
Plus, having multiple uninsured periods on your insurance record can cause your rates to spike when you get coverage again. So, if you're heading back to your home country or won't be using your car for a while due to other reasons, the best approach is to reach out to your insurance agent and handle your insurance status during the period you're not driving in the most appropriate way.
Driver's age
Turning 21 and 25 are pivotal milestones in the world of car insurance. Drivers under 21, especially those buying their first car and insurance, may find the premiums particularly steep. And those aged between 21 and 25 are still considered "young drivers."
Fortunately, numerous insurance companies offer a variety of discounts tailored for drivers under 25. Take the "good student" discount, for instance, which rewards young individuals with excellent academic records. There's also the discount for completing a driver's education course, encouraging drivers to hone their skills. If a young driver qualifies for all these discounts, they can pocket quite a bit of savings.
Car owner's address
The impact of your address on car insurance rates might surprise you more than you think.
I had a client who originally lived in the suburbs, paying around 700 for six months of full coverage.But when he moved to Philadelphia and got a new address,his insurance soared to1,800 for the same six-month period with the same coverage—isn't that astonishing?
While it's generally true that car insurance in urban areas tends to be more expensive than in the suburbs, even within the same city, rates can vary widely depending on the ZIP code. Sometimes, even within the same ZIP code, different streets can have different rates. If your address is considered to be in a higher-risk area for accidents, your insurance rates could be higher; conversely, if your address is in a lower-risk area, your rates could be lower.
Safety of automobiles
Many people are aware that the value of a car can impact its collision and comprehensive insurance premiums, as in the event of an accident, the insurance company will cover up to the market value of the insured vehicle at that time (minus the deductible). However, what many don't know is that a vehicle's safety rating can also affect the price.
If a car model has a low accident rate and fewer claims according to insurance company data, it may qualify for a vehicle safety discount. I've seen some cars receive significant vehicle safety discounts, while others get zero discount in this category.
Above, we've covered five factors that influence car insurance rates, but in reality, there are many more that can affect the price. Factors such as marital status and credit score also play a role in determining premiums. Different insurance companies have different pricing standards and discount programs. Among these factors, some are within our control, while others are not.
But if you take care of what you can control – drive carefully, avoid accidents and tickets, and maintain a good insurance record – you're essentially saving yourself money.