The Fruitless Act of Comparing Other People’s Insurance Premiums
So many of our customers ask why their insurance premiums vary so greatly from the price that their friends, neighbors, and colleagues pay. The truth is that every insurance premium is tailored to the individual. Dozens of factors contribute to the final price of an insurance premium. The number of variables can seem infinite to the point that comparing the same type of policy between different people is the equivalent of comparing apples to oranges. As much as we would all love a one-size-
fits-all approach to insurance, it’s simply not the case. Learn about the many different factors that determine the price you pay for insurance.
Zip Code
Where you live is one of the biggest factors that affect the price of insurance, especially for auto insurance. Every zip code has its own price depending on the average number of accidents every year, traffic levels, the local weather, and the population density. If you’re looking to slash your auto insurance premiums, try moving someplace rural with warm weather all year long.
Credit Rating
Those three digits affect just about every major financial decision that you’ll ever make. Your credit score determines the interest rate on your mortgage, your student loans, your ability to open a bank account, and the price that you pay for insurance. Keeping your credit score above average will help you save hundreds of thousands of dollars over the course of your entire life.
Marital Status
It might sound old-fashioned, but your marital status tells the insurance company volumes about your personal life. Being married is a sign of stability. Overall, married people tend to take on less risk, are usually more responsible with their money, and are more likely to stick with one insurance company for a long period of time.
Driving Record
Affecting more than just auto insurance, your driving record is a telltale sign of your overall behavior in the world. Insurers will look at your driving record to see how well you perform under pressure. Are you careless, quick to respond, absent-minded or extremely diligent? The next time you hop in your car, think of your driving record as your report card for life.
Type of Vehicle(s)
The type of vehicle you drive affects your habits on the road. If you drive a poorly rated vehicle that’s long past its prime with out-of- date safety features, you will get stuck paying a higher premium.
Insurance History
The history you have with your previous insurers is a lot like going over your relationship history on a first date. How long were you with this insurance provider and why did you break up? Sticking with one insurance company for a long period of time will help you avoid costly premiums in the future.
Amount of Coverage
Another major factor that affects your insurance premiums is the amount of coverage you sign up for in the first place. Adding more coverage with higher benefits means more risk for the insurance company. They have to counter that risk by charging you a higher premium.
Even if you have the same credit score or driving record as your neighbor or your friends at work, there are dozens of additional factors that will affect the price you pay for insurance. The next time you’re tempted to compare premiums with someone you know, look at those numbers with a grain of salt.