Americans are getting hammered by inflation on everything from groceries to gas.
Now car insurance rates are through the roof and taking another bite out of family budgets.
And a Mercury Insurance executive revealed one secret that’s making your car insurance cost way more.
Car insurance costs are soaring nationwide
The cost of just about everything has skyrocketed over the past few years with Americans still feeling the pain of Bidenflation.
Unfortunately, car insurance is no exception to the nationwide price hikes affecting consumers.
Kevin Quinn, Vice President of Auto Claims for Mercury Insurance, recently disclosed several key factors that determine how much you’ll pay for car coverage – and some of them might surprise you.
“Unlike other factors, your driving record is one that you have some control over. Drivers with a clean motor vehicle record and no at-fault accidents typically get the lowest car insurance rates,” Quinn explained.
But your driving record is just one piece of a complex puzzle that determines whether you’re paying premium rates or getting the best possible deal.
Five factors that determine your car insurance rates
Quinn broke down the five main factors that insurance companies use when calculating your rates.
First on the list is your driving record, which insurers scrutinize heavily. Even a single speeding ticket or minor accident could cause your rates to increase significantly.
Insurance companies use a driver’s past as a predictor for future risk.
Most companies review your driving history from the previous three to five years, but serious violations like DUIs can affect your rates for much longer.
Your age is another major factor, with teenagers paying some of the highest premiums due to their lack of experience. Rates typically decrease as drivers gain experience, with the lowest rates generally going to drivers in their mid-50s before climbing again for seniors.
Where you live could cost you thousands more
Location plays a surprisingly large role in determining your rates, with some ZIP codes costing significantly more than others just a few miles away.
“If a policyholder lives in an area that is more prone to vandalism, like a big city for example, car insurance premiums will be higher because the possibility of that policyholder filing a claim is greater,” Quinn stated.
Some states also require more extensive coverage or higher coverage limits by law, which pushes rates up for all drivers in those areas.
The type of vehicle you drive also makes a major difference. Those sleek sports cars, luxury vehicles, and even some electric vehicles generally cost more to insure due to expensive repair parts.
An EV battery, for example, can cost thousands of dollars to replace if damaged.
Cars with strong safety ratings and lower repair costs typically help keep insurance premiums down.
The hidden factor that could be driving your rates through the roof
Perhaps the most surprising factor affecting your insurance rates is one that many drivers don’t know about – your credit score.
Many drivers are likely unaware that their credit score is fair game for insurance companies when setting rates.
Insurance data shows that drivers with lower credit scores tend to file more claims – and more expensive ones – than those with better credit. This has led most insurance companies to include credit scores in their rate calculations.
However, a handful of states have pushed back against this practice. California, Hawaii, and Massachusetts have laws restricting or banning the use of credit scores for setting insurance rates.
“We understand that in these uncertain economic times, many are looking to reduce their auto insurance spend. Therefore, it is best to focus on the factors that you can control,” Quinn advised.
His recommendations include choosing affordable vehicles with good safety ratings, researching insurance rates in different ZIP codes before moving, and above all, being attentive and following traffic laws when behind the wheel.
With inflation continuing to strain family budgets across the country, understanding these factors could help you find ways to lower your premiums and keep more money in your pocket.
