The American auto insurance industry dates back to the closing years of the 19th Century. In the time since, it has expanded into a billion-dollar enterprise. Now there are more than 268 million motor vehicles registered in the U.S.364925BF-22D7-405E-BBD3-A35489D76575 Created with sketchtool. Back
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Save $741 on average this year by shopping for new car insurance Rates vary by state up to 400% The average American pays $129/month for auto insurance Every year, countless American motorists turn to auto insurers for their insurance needs. But the industry is complex, with many factors that affect the rate of a policy. Which factors determine a policy’s price can be easily misunderstood, and that can impact a person’s ability to find reliable auto insurance.
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Close Icon Close Icon The widget will live hereIf misconceptions cloud our perspective, it’s even harder to find the information needed to make an informed choice. With this in mind, we decided to find out which myths in the auto insurance industry are commonly believed today. A survey was conducted through YouGov of over 1000 adult car owners in the U.S. The survey asked the car owners if they believed various auto insurance myths were true or false—and the results are surprising. Below we’ll address these myths, explain why they are myths and discuss what impacts the individual rate of auto insurance policies. Myth 1: The color of your car affects your insurance ratesOur survey found that 45 percent of respondents believe that car color affects insurance rates. Once again, this is untrue. The longstanding myth goes something like this: People with red cars like to drive fast. Maybe it’s because many sports cars come in red. Maybe it’s because red is a flashy color that attracts fast drivers. But whatever the case, insurers think that people who drive red cars are more likely to exhibit high-risk behavior. Luckily for owners of red cars, none of this is true. Auto insurance ratings do not factor in the color of the vehicle. In fact, insurers probably don’t even know what color the car is. When signing up for car insurance, the company will ask for the vehicle identification number (VIN), which includes the manufacturer, year built, engine size and type and which plant assembled the vehicle. The VIN does not include car color. The only way a car’s color will affect the price of insurance is if the car has a custom paint job. Insurance companies view car customizations as adding additional value to the car, which means the car would be worth more than usual if sold. Therefore, most auto insurers will raise the premium. But even then, the change in cost should be minimal. Myth 2: You can negotiate your rates with your insurance companyOur survey found that 49 percent of respondents believe that negotiating rates with an insurance company is possible. However, this is false. Attempting to negotiate the rate of an auto insurance policy is like trying to negotiate with a utility about the price of electricity—it simply won’t work, and there’s a good reason for this.The auto insurance industry is heavily regulated by state and federal governments. The price points set by insurance companies must comply with the regulatory guidelines, which can change from state to state. So, insurers don’t have a lot of room to decide how much they will charge for an auto insurance premium. Those prices are set by lawmakers. However, most auto insurers offer discounts on premiums for people who are considered low-risk to insure. Factors like having a clean driving record or a car with advanced safety features can bring down the cost of auto insurance considerably. Myth 3: Parking tickets affect insurance ratesOur survey found that 49 percent of respondents believe that parking tickets affect insurance rates. Thankfully, this isn’t the case. Parking tickets do not affect personal auto insurance rates, and car insurance companies won’t look into how many parking tickets a driver has received. When the car was ticketed for a parking violation, no one was driving, so it doesn’t affect the cost of the insurance.However, speeding tickets are a different case. When auto insurance underwriters evaluate the risk of insuring the vehicle, they will look into the car owner’s driving history. Any tickets or arrests for unsafe driving like running red lights or driving under the influence will affect the premium. Many insurers offer discounts to drivers with clean records, so it pays to be careful behind the wheel and avoid unnecessary risks on the road. What does affect car insurance rates?Now that we’ve gone over the myths surrounding car insurance, let’s discuss the factors that will have an effect on a car insurance premium. Each state has different laws on insurance rates. Within those laws, each insurer has individual parameters on how to determine the risk of insuring a driver. Which factors go into determining the rate of an auto insurance policy will differ from state and insurer. But here are a few of the common factors that affect car insurance rates:
Age: People older than 25 years usually find themselves in fewer accidents than those below the age of 25, so auto insurers usually give lower rates to older drivers.
Gender: Women are known to have less driving incidents than men. Every year, more men than women die in accidents, and they also engage in risky behavior behind the wheel. Because of this, some insurers may charge men more for coverage.
Driving record: People with clean driving records will generally get lower rates on auto insurance. Drivers with a history of incidents will usually pay more, but some insurers will reduce rates after a few years with no infractions.
Frequency of use: Occasional drivers usually receive lower rates than people who use their car a lot. More time on the road means that the driver will be at a higher risk for accidents, and insurers account for this.
Location: Every region in the U.S. has its own risks, such as crime rate, weather and the state of public roads. When setting a policy rate, insurers will pay attention to the location and factor it into the risk of insuring the driver.
Car type: The car model matters in an auto insurance policy because the cost of the car is a significant factor. Expensive cars are also expensive to insure. Other factors like the car’s safety and security features will also affect the rate of the policy.
These are all important in determining how much a driver will pay for their insurance premium, but these aren’t the only ones. Providers also make decisions based on data they don’t publicize. The most important thing for you to do is drive as carefully as possible and ask for any discounts you might be eligible for to reduce your premium.Car insurance can seem overwhelming if you’re not familiar with it, but it isn’t as complicated or arbitrary as it might seem at first glance. By being familiar with the truths of car insurance and knowing what is a myth, you can be better informed when you’re looking for the best auto insurance for you.