What really determines how much you pay for your policy? Probably not what you think
It sounds weird at first: Car insurers don’t care how much you earn, but they do care about how much you spend.
They don’t care how much you’ve saved for retirement, but they do care if you’re married. And why would a company that insures your car want to know if you own a house?
“All these factors are based on actual claims experience,” says Jeanne Salvatore, senior vice president for the Insurance Information Institute. Most of us know that age matters — anyone who’s watched their premiums plummet from their teen years to their golden years understands that. And they understand why. Teens are terrible drivers, and thus terrible insurance risks.
In fact, two surveys of 1,000 adults by InsuranceQuotes.com show that 88 percent knew that age matters. But 43 percent also thought their income mattered. It doesn’t. That’s one of several car insurance myths they debunk.
“Another factor that does not typically affect car insurance rates is employment status,” the survey explained. “However, only 36 percent of Americans know this.”
Here are the factors car insurance companies do consider, along with the percentage of Americans who knew it…
- The driver’s education level (43 percent)
- Whether or not the driver owns a home (53 percent)
- The driver’s gender (54 percent)
- The driver’s marital status (58 percent)
- The driver’s ZIP code (63 percent)
- The driver’s credit history (66 percent)
- The make and model of the vehicle (84 percent)
- The age of the car (86 percent)
- The driver’s age (88 percent)
“On average, a 20-year-old man pays about 25 percent more than a 20-year-old woman, but only one in four Americans knows this,” the survey says. “Half of Americans say it’s fair that insurance companies typically charge young men the highest car insurance rates, while 43 percent think it’s discrimination.”
While you can’t make yourself age faster or (easily) change your gender, “drivers can control most of these factors,” says Laura Adams, senior analyst at InsuranceQuotes.com. “In addition to maintaining a good driving record and credit history, they should compare rates from at least three carriers annually.”