Factors That Determine Your Insurance Premium
Nine Reasons Your Insurance Premiums May Be Higher:
Insurance company employees receive extensive training in the factors that determine your insurance premium. Many of these people spend their entire professional lives trying to determine which factors make someone more likely to file a claim. This is so they can establish what your cost will be for auto, home, life and medical insurance.
Some factors, including your health status for life and medical insurance, and your driving history for auto insurance, make sense.
However, others can be puzzling, and some of the specific factors that are considered vary from insurer to insurer. Consider the factors described below and how each company uses them as you shop for the best deals on insurance.
1. Your Driving History Affects Your Insurance Premium
Your history of violations and the number of miles you drive each day impact your health and life insurance premiums as well as your car insurance premium. Life insurance companies consider this record because they are trying to determine your risk of dying in a car accident.
This means that if your record from the last three years includes moving violations, you will pay a higher life insurance premium than someone without violations. The number of violations needed to trigger a rate increase varies from insurer to insurer. Additionally, some health insurance companies will not insure individuals who have had a recent DUI conviction.
2. Your Car and Your Insurance Premium
More expensive cars cost more to replace and repair, so the more expensive your car, the higher your insurance premium. The type of engine in your car will also play a role in determining how much you have to pay for auto insurance. Typically, four-cylinder cars cost far less to insure than vehicles with six or eight-cylinder engines.
3. Where You Live Can Affect Your Insurance Premium
When experts from CarInsurance.com studied the relationship between car insurance prices and zip codes, their findings were startling.
For example, a 42-year old Honda Accord owner with a good driving record who lived in Laughlin, NV paid about $1,290 annually in car insurance premiums. If he lived a short distance away in Bullhead City, AZ, he would pay more than $500 less for his insurance with the same record and same car.
Rates can differ hundreds or thousands of dollars based solely on zip code. This is due to state and local insurance regulations in addition the number of claims people make in a particular area.
4. Your Credit History Can Affect Your Insurance Premium
People with bad credit tend to get into more accidents than those with good credit, so many companies charge a higher insurance premium to those with low credit scores. This provides drivers with even more incentive to maintain good credit. In the past few years, however, some states have drafted bills to limit or abolish this practice.
5. Employment and Education
Insurance companies have noted that people with more education tend to have fewer accidents. The insurance director for the Consumer Federation of America, Robert Hunter, advises consumers that the more education they have completed, the lower their insurance premium is likely to be.
Similarly, your job can influence your auto insurance costs. Doctors, lawyers, executives and other white-collar workers receive substantial discounts with some insurers and pay a much lower insurance premium than those with blue-collar jobs. Many companies also offer discount rates to teachers.
6. Your Weight May Affect Your Insurance Premium
Those who are overweight are at a greatly increased risk of developing costly and life-threatening medical problems. Quite a few insurers have responded to this fact by raising the life insurance premium of obese individuals.
Specific rates and regulations vary by company. However, individuals with a body mass index (BMI) of 27 are not eligible for the lowest premiums with many insurers.
Research by a major medical insurance site found that currently, if you have a BMI over 30, you pay 22% more on average than a person whose BMI is 25. Even if you lose weight, most insurers will not lower your rates until you have maintained your weight loss for a year or more.
7. Family Health Can Affect Your Insurance Premium
If you have close family members, including siblings and parents, who died from congenital diseases, such as heart disease and cancer, before the age of 60, you will pay a higher life insurance premium than people without this type of family history.
In fact, some insurance companies will even charge you the same high rates if you have a family member who was diagnosed with one of these diseases before age 60 and survived.
8. What You Do in Your Spare Time Will Affect Your Insurance Premium
People who pursue dangerous pastimes, such as rodeo riding, stock car racing, skydiving, hang gliding, base jumping, motorcycle racing and others, usually do not qualify for a low life insurance premium. Many companies will ask you extensive questions about your pursuits before giving you a rate quote to make sure you are not in a high-risk category.
For example, some dangerous-sounding activities, including as various forms of scuba diving or other types of diving, will not affect your rates, but riskier types of diving, including cave diving, deep sea diving and diving without being certified by the Professional Association if Diving Instructors, will disqualify you from a lower insurance premium.
In addition, if you travel to dangerous spots, like Afghanistan or Iraq, or to statistically risky destinations, like Mexico City and Monterrey, you could see an increase in your insurance rates.
9. The Record of Claims Filed for Your Home
Comprehensive Loss Underwriting Exchange (CLUE) is a service through which insurance companies share information about the past seven years of claims by individual homeowners.
Each time you apply for insurance, the insurance company will check your home’s CLUE report, and even claims filed before you owned or lived in the house can increase your rates.
This is because if your home has a history of issues, such as water damage or structural problems, you are more likely to have problems in the future that will lead to you filing a claim. To prevent past problems from haunting you in the form of a sky-high insurance premium, check the home’s CLUE report before you buy it.
