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The Credible Money Coach helps an elderly driver understand the factors that affect auto insurance premiums. (Credible)
Dear credible money coach,
I drive a 2016 Hyundai Tucson Sport that I bought new and has full coverage. My last accident involving only my truck was in 1998. I haven’t had one since. I am 75 years old. Why is my auto insurance high – around $ 790 per year? – Eileen
Hi Eileen! Thanks for your question and congratulations on what looks like a great driving record. It is widely reported that the average person will enter around four accidents during their lifetime, which reaches about one every 18 years or so. With 23 years without an accident, you are doing better than average!
Since you’re 75, you’re probably retired and on a fixed income, so $ 790 a year can seem like a big burden. It may help to know, however, that your annual premium is actually well below the national average. American News and World Report just studied auto insurance costs and found that the average annual premium is $ 1,321. The researchers looked at data from the nine largest national auto insurers and found significant differences in premium amounts based on several factors.
You can visit Credible’s online marketplace to get an overview of how auto insurance works and see several auto insurance quotes.
Let us look at some factors that the Insurance Information Institute, or III, can affect auto insurance premiums.
Vehicle factors
The most important factor when it comes to insurance costs for most consumers is the car type we drive. If you drive an expensive vehicle and have an accident, the repair will likely cost the insurance company more than a cheaper car. Likewise, if your car is of a frequently stolen make and model, or has a poorer safety record, your premium may be higher. On the other hand, cars equipped with many safety features can benefit from premium discounts.
How much miles traveled by your car This also comes into play. A vehicle used daily for a long trip will accumulate more miles (and depreciation) than a car driven purely for fun – and you will likely have to pay a higher premium.
Driver factors
It is not surprising that your driving save affects your auto insurance premium. Drivers with more accidents or movement violations are likely to pay a higher premium than drivers with little or no markings on their records.
Your age and gender also help determine your premiums. Typically, women pay less than men because statistically they are less likely to have crashes, less likely to have serious crashes, and less likely to drive under the influence, says the III. Of course, this is general data and each driver’s skill level is unique.
While it’s probably not surprising that drivers under 25 tend to pay the most – because they are less experienced and therefore generally more susceptible to accidents – it can be telling to hear that the premiums are starting again. to increase when a driver turns 65. In fact, several reports indicate that average insurance premiums for older drivers may in fact be higher than the averages for drivers 25 and under.
Finally, some auto insurers take your credit rating into account when determining your premium. Insurers are watching your credit score as a predictor how likely you are to file a claim and how much your claim could cost if you file a claim. Yet another reason to aim for a high credit score! It should be noted that several states have laws that prohibit auto insurers from using credit scores as a factor in underwriting decisions.
Location factors
Where you live, drive and keep your vehicle everything can affect your insurance premium. Drivers who live or work in cities generally pay more due to higher rates of vandalism, theft and accidents in urban areas. And if you park your car in a secure garage rather than on the street, your premiums may be lower.
And, of course, the premiums can vary widely depending on the state you live in. Data III shows that the state with the highest rates is Louisiana, while North Dakota has the lowest average insurance cost.
Policy factors
The type and amount of insurance you also have an impact on your premium. Eileen, you say you have full coverage on your 2016 Tucson Sport. “Full coverage†usually means you have third party liability (mandatory in most states), collision, and full coverage. Full coverage usually costs more than the bare minimum required by law.
The amount of your deductible also influences your premium. As a general rule, the higher your deductible, the lower your premium, and the lower your deductible, the higher your premium.
Finally, the insurance company you use has a big impact on how much you will pay each year. While all auto insurers offer the same services, not all insurance companies are perfect for all drivers. It’s important to comparison store for the best insurance company (and politics) for your needs, especially if you think you’re paying too much right now.
Compare rates and coverage through Credible’s online marketplace is a great way to find a policy that meets your needs at a price you think is fair.
Ready to learn more? Discover these articles …
Need Credible® advice on a money issue? Email our credible money coaches at [email protected]. A Money Coach could answer your question in a future column.
This article is intended for general informational and entertainment purposes. The use of this website does not create a professional-client relationship. Any information found on or derived from this website should not be used as a substitute for and should not be construed as legal, tax, real estate, financial, risk management or other advice. If you require such advice, please consult a licensed or competent professional before taking any action.
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About the Author: Dan Roccato is a Clinical Professor of Finance, School of Business, University of San Diego, Credible Money Coach personal finance expert, published author and entrepreneur. He has held leadership positions at Merrill Lynch and Morgan Stanley. He is a recognized expert in personal finance, global securities services and corporate stock options. You can find it on LinkedIn.
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