Nearly half (43%) of all Americans incorrectly believe their income impacts how much they pay for car insurance, a new insuranceQuotes.com report reveals.
According to two surveys conducted for insuranceQuotes.com by Princeton Survey Research Assocs. International, many Americans are confused about which factors insurers take into account when setting premiums for a driver. Factors such as gender, residence ZIP code and income are some of the factors that consumers question when it comes to auto insurance rates.
To address the concerns of consumer, insuranceQuotes.com released a detailed report that indicates which factors come into play when car insurance companies determine level of risk.
A blog post on insuranceQuotes.com written by Allie Johnson quotes Insurance Information Institute Senior Vice President and Chief Communications Officer Jeanne Salvatore as saying car insurance companies use their own claims data, collected over many years, to figure out how driver characteristics affect risk. "All these factors are based on actual claims experience," Salvatore says in the blog.
When setting a driver's rate, insurers typically consider the following factors:
1. Age
Age is one of the most important considerations, as drivers tend to be better as they gain more experience behind the wheel. How long a client has been driving is a factor that all insurers consider, and insuranceQuotes.com's survey reveals that 83% of Americans acknowledge the importance of driving experience.
2. Gender
Gender is a major factor in car insurance rates, the study claims, but many Americans think that this practice is unfair. 43% of respondents claimed that charging young men the highest rates is discrimination. Some states, such as Hawaii and Montana, however, do not allow car insurers to consider gender in their assessments.
3. Credit History
Poor credit can nearly double car insurance rates, and even so-so credit can increase rates by approximately 25% more than what those with excellent credit would pay.
"As a group, people with better credit get into fewer and less severe accidents than those with poor credit," Salvatore said.
Insurers take raw data from clients' credit histories and use its own methods to create an individualized insurance credit score. Red flags include bankruptcies, late or missed payments and cancelled credit card accounts. California, Massachusetts and Hawaii, however, do not permit insurers to use credit as a factor in car insurance rates.
4. Marital Status
Married drivers tend to drive more safely, and that is why auto insurance applications often ask for a driver's marital status.
Because young, married people often tend to be driving their spouse and children, they're less likely to be driving recklessly.
5. Location
Address can play a big role in insurance rates.
"If you live in an area with high crime, extreme weather or high accident rates, you'll pay more for car insurance," Salvatore said.
6. Car
The make and model of the car can play a role in insurance rates. Expensive cars will cost more to insure. The safety record for the vehicle, the likelihood of the vehicle being stolen, and other factors impact rates.
7. Education
According to insuranceQuote.com's survey, more than half of respondents claimed that they did not believe that education level impacts their car insurance rates. Contrary to this belief, education is actually a factor considered by some insurers in certain states.
While all of these factors could be taken into consideration when determining car insurance rates, there are several factors that do not come into play.
According to the survey, 43% of respondents wrongly believe that income affects how much drivers pay for car insurance. Similarly, 34% of Americans do not know or incorrectly said that retirement savings impact their rates.
The survey also addresses ways that agents can help to lower their clients' rates. For more on common car insurance misconceptions, read the report on insuranceQuotes.com.
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