Factors and Life Events That Can Impact Your Auto Insurance Rate

October 26, 2023

Life Events That Can Affect Your Auto Insurance

When a big life event takes place, such as getting married or purchasing a home, you don't always think of its impact on your auto insurance. Much more goes into calculating auto insurance rates than age, gender or driving record, so it's good to understand why rate changes happen. Other factors include your location, credit history, mileage, and coverage limits, as well as any discounts you may be eligible for based on factors like bundling policies or installing safety features in your vehicle. In addition to existing factors, we’ll lay out some of life’s milestones that could impact your auto insurance.

General Factors That Can Impact Your Car Insurance Premium

Driving Record

  • Accident history: Having a history of accidents can significantly impact your auto insurance cost. Insurance companies consider at-fault accidents as an indication of higher risk, which may result in higher premiums. On the other hand, a clean driving record with no accidents can lead to lower insurance costs and potential discounts.
  • New drivers: New drivers, especially teenagers or individuals with limited driving experience, generally face higher insurance rates. Insurance companies view inexperienced drivers as higher risks due to their lack of on-the-road experience. As new drivers gain more experience and maintain a clean driving record, their insurance premiums may gradually decrease.
  • Experienced drivers: Experienced drivers with a long history of safe driving are typically rewarded with lower insurance premiums. Insurance companies perceive experienced drivers as lower risks due to their demonstrated ability to navigate the road safely. These drivers often qualify for various discounts and benefits based on their driving record and history.
  • Car ownership: Whether you own your vehicle outright or have a financed or leased car can impact your insurance costs. Lenders or lessors may require comprehensive and collision coverage, which can increase premiums. Additionally, the value of your car can influence the cost of insurance, as more expensive vehicles generally require higher coverage limits.

How Often You Drive:

  • Commute length: The length of your daily commute can affect your auto insurance premiums. Longer commutes may result in higher premiums as they typically involve more time spent on the road, increasing the likelihood of accidents or exposure to hazards. Shorter commutes or driving fewer miles annually may qualify you for lower rates or usage-based insurance programs.
  • Vehicle usage for work: If you use your vehicle for work purposes, such as making deliveries or using it as a rideshare driver, it may impact your insurance costs. Insurance companies may require additional coverage or offer specialized policies for commercial or business use, which can result in higher premiums compared to personal use policies.

Demographic Factors:

  • Location: Where you live plays a role in your auto insurance costs. Areas with higher crime rates, higher accident rates, or dense urban environments may lead to higher premiums. Conversely, living in a rural or suburban area with lower population density and fewer incidents can result in lower insurance rates.
  • Parking location: Where you park your car can impact your insurance cost. Parking in a secure garage or using monitored parking lots can potentially lower your premiums as they reduce the risk of theft or damage. Conversely, parking on the street or in high-crime areas may increase your insurance rates.
  • Age: Age is a significant factor that influences auto insurance premiums. Younger drivers, especially teenagers, typically face higher insurance costs due to their perceived higher risk and lack of driving experience. Premiums may decrease as drivers get older and gain more driving experience, typically reaching a low point in middle age before potentially increasing again in later years.
  • Gender: In most jurisdictions, gender can still be a factor that impacts insurance premiums. Historically, statistics have shown that certain age groups and genders have different accident rates, leading to varying insurance costs. However, this practice is evolving, and some regions have implemented regulations to limit or eliminate gender-based pricing.

Types Of Coverage

Liability Insurance

  • Provides financial protection if you cause an accident and are held responsible for injuries or property damage to others.
  • Covers legal defense costs and settlement amounts up to the selected coverage limits.
  • Typically offered as split limit coverage, such as 25/50/15, which represents $25,000 bodily injury per person, $50,000 bodily injury per accident, and $15,000 property damage per accident.

Collision Insurance

  • Helps pay for repairs or replacement of your vehicle if it is damaged in a collision, regardless of fault.
  • Coverage may be subject to a deductible, which is the amount you must pay out of pocket before the insurance coverage applies.
  • Can be valuable if you have a financed or leased vehicle or if your vehicle has significant value.

Comprehensive Insurance

  • Provides coverage for damages to your vehicle caused by incidents other than collisions, such as theft, vandalism, fire, or natural disasters.
  • Covers the cost of repairing or replacing your vehicle up to the coverage limits, minus any applicable deductible.
  • Commonly included with collision coverage as part of a full coverage auto insurance policy.

Medical Payments Coverage

  • Provides coverage for medical expenses for you and your passengers regardless of fault.
  • Can help cover costs such as hospital bills, doctor visits, surgery, and other medical treatments.
  • Coverage limits can vary and can be tailored to your specific needs.

Uninsured Bodily Injury Coverage

  • Provides coverage if you are injured by an uninsured driver.
  • Prices for uninsured bodily injury coverage can depend on factors such as coverage limits, your location, and the likelihood of encountering uninsured drivers.
  • Higher coverage limits typically lead to higher premiums, but they offer greater protection in case of an accident with an uninsured driver.

Uninsured Property Damage Coverage

  • Pays for damages to your vehicle caused by an uninsured driver.
  • Prices for uninsured property damage coverage may be influenced by factors such as coverage limits, your location, and the prevalence of uninsured drivers in your area.
  • Higher coverage limits can result in higher premiums, but they provide increased protection for your vehicle.

Roadside Assistance Reimbursement

  • Covers expenses associated with roadside assistance services, such as towing, jump-starts, flat tire changes, and lockout assistance.

Rental Reimbursement

  • Helps cover the cost of renting a substitute vehicle while your insured vehicle is being repaired due to a covered claim.

What Kind Of Car You Drive:

Make/model/year of the car: The make, model, and year of your car can affect your insurance costs. Insurance companies consider factors such as the car's safety features, repair costs, theft rates, and overall risk profile associated with the vehicle. Expensive or high-performance cars generally have higher insurance premiums compared to more affordable and family-oriented vehicles. Older cars may have lower premiums due to their lower value and repair costs.

Life Events And Milestones That Can Impact Your Car Insurance Premium

Buying a Home

It's a proud day when you buy your first home, but with home ownership comes big responsibilities. One of those responsibilities is the requirement of homeowners insurance. If you have your homeowners and auto policy with the same insurer, you can usually bundle the two, which will effectively lower your auto insurance rate. Homeowners are often eligible for lower car insurance rates due to their lower calculated risk and the bundling of the homeowners policy with the auto insurance policy. Once you buy a home, you may also wish to consider increasing your automobile liability to reflect the value of your home, so you’ll have more financial stability if, for example, you are sued as a result of an auto accident.

Getting a Raise or Retiring

If you've recently received a raise at work or entered retirement, now's the time to revisit your policies. Consider increasing coverages, such as bodily injury and property damage. These policies cover medical payments and include uninsured motorists coverage that protects you from a loss if you get into an accident with someone who is under-insured or without auto insurance. Putting more money into your premiums today could save you more down the road.

Adding a Teen Driver

Handing your teenager the keys to a car and watching them drive away for the first time can be nerve-racking. Knowing your teen is properly covered with insurance can help to ease the stress, especially since it's required. Because teen drivers have a much higher accident rate than older drivers, making them riskier to insure, your rates will likely increase, so talk to your agent about young driver discounts.

Farm Bureau Insurance customers should ask about the First Mile discount, a teen driver program which could earn you a 10 percent discount on auto insurance for the young driver's vehicle. First Mile is an excellent learning tool for teens. Emphasizing the utmost importance of safety, it involves teens in an interactive experience that is both informative and engaging. It’s impossible to complete the program and earn the discount without taking a serious look at the dangers involved with teen driving—and making a real commitment to be as safe as possible.

Getting Divorced

If you and your spouse decide to part ways, you'll want to make sure both of you (and any dependents) are still properly covered. As you divide up assets, you'll need to separate your insurance policies as well. To avoid gaps in coverage, a spouse will need to establish his or her own individual policy before being canceled from a joint policy. Talk to your spouse and your agent about discounts you may lose or become eligible for in the event of a divorce.

As you can see, there are many factors that can play into how much you’re paying for your car insurance. While it may not be ideal, it’s important to be aware of these factors so that you’re not surprised by any changes that may occur to your premium. The most important thing is your safety on the road, however, so we’ve got several car insurance options for you to choose from.

Keep Your Coverage Up To Date As Life Changes

With its constant changes, life can be overwhelming, but your local Farm Bureau Insurance agent is always ready to help. Schedule a review with your agent at least every three years to make sure you're properly covered in all aspects of life and receive the best possible deals.

Posted in Auto