I ended the day on Tuesday talking with a woman in Houston about car insurance for her and her adult daughter that lives at home. Our discussion covered the typical points I need in order to provide her with a quote; names, dates of birth, year, make and model of the cars, who is she insured with now, when does her policy renew, etc.
What was interesting was, she asked me why I asked my last two questions which were:
- What is your social security number?
- What do you do for a living?
Most people I talk with about car insurance assume the biggest factors that impact their rate is what kind of car they drive and whether or not they have tickets or accidents. These items, as well as other driving related factors, do impact the rate, however, most people, don’t realize non-driving factors can be as great or greater an influence their car insurance rate as the driving related factors.
The 6 non-driving factors that impact what a person pays for car insurance are:
- Marital status
- Credit score
- Zip code
- Gender and age
Marital Status: Insurance companies love married people as they believe they are a better risk. Most insurance companies see married couples as more responsible and as more careful drivers so they reward them with a discount for being married:
- Married usually means a lower rate
- Single usually means a higher rate
Having gone through a divorce and later remarrying, I understand their position, I just don’t agree with it. I didn’t feel as if I were a different driver when I was married, then divorced, then remarried, but the insurance companies did so my rates varied in each of those time periods.
If you’re not a typical “nuclear” family but in a committed relationship or partnership where your finances are blended, be sure to discuss that with your agent. You may still qualify for the married discount.
Please note, if your spouse or partner has a worse driving record than you, you’ll still get the discount but may pay more for car insurance due to their accident or ticket history. A lower rate is not guaranteed.
Credit Score: I’ve mentioned credit score in several past blog posts on home and car insurance, but it does bear repeating. Statistical studies indicate people with good credit file fewer claims than people with poor credit so insurance companies rate accordingly.
- People with good credit pay less for car insurance
- People with poor credit pay more for car insurance
This does apply in Texas and many other states; however there are some states that do not allow credit to be a part of the formula for computing your car insurance rate. I still hold out hope that Texas will overturn this practice. For now, though, I do ask people for their social security number since credit does factor into what a person pays for car insurance. The evaluation the carriers perform does not impact a person’s credit score though. Insurance companies analyze existing credit data to draw their own conclusions instead of issuing a hard hit such as when you apply for credit.
Zip Code: Where you live plays a pretty big role in your car insurance rate. People who live in larger cities such as Dallas, Fort Worth, Houston, Austin & San Antonio have to deal with more drivers, more cars, and more risks than people who live in Prosper, Pilot Point, West, or Brady. More urban areas mean your risk for an accident (claim) is higher than people who live in smaller towns.
- Bigger city means a higher premium
- Smaller town means a lower premium
Even in an area such as the Dallas / Fort Worth area, rates vary. For instance, rates in Dallas & Tarrant Counties are about the same, while rates in Collin, Rockwall and Denton Counties are lower. Areas with larger populations are also subject to more thefts, vandalism, and insurance fraud which also impact rates.
Gender and Age: The battle of the sexes along with the ages is especially prevalent when it comes to car insurance. Statistically speaking, men have more accidents than women and teens have more accidents than adults. In general terms, this means:
- Male drivers pay more for car insurance
- Women pay less for the same car insurance
- Teens pay the highest rates
- Adults pay a lower rate
Youthful drivers may experience a slightly lower premium, depending on the insurance company, when they turn 20 or 21. This is due to them having 3 years of driving experience under their belt if they got their driver’s license at 16. Their real break comes when they turn 25, the age most insurers recognize them as an adult.
The other interesting trend I’m observing is older drivers. Rates tend to creep up for drivers in the 70s, 80s and 90s due to higher incidents of accidents. Some insurance companies tend to shy away from older drivers and some actually prefer them to drivers in their 30s, 40s and 50s. It truly just depends on the company.
Education: Your education may also determine your car insurance rate. Many insurance companies provide discounts for people with associates, bachelors, or advanced degrees. For the insurance companies that offer such discounts:
- People with an associate degree pay less for car insurance than someone with a high school diploma or GED
- People with a bachelor’s degree pay a little less than someone with an associate’s degree or high school diploma
- People with advanced degrees such as master’s, doctorate, law or medical degree, etc. pay lower still
The rationale for the companies that take this into consideration is threefold:
- People with degrees tend to be better risks
- They may fit a certain profile the company prefers to write
- They typically write more policies (auto, home, umbrella and life)
If you’re evaluating your car insurance options, be sure to mention your education to the agent. It could add up to some attractive savings.
Career: What you do for a living can provide nice savings on your car insurance too. Like education, there are insurance companies that provide discounts for teachers, farmers, business executives, doctors, dentists, architects, and lawyers to name a few. It’s worth mentioning what you do with your insurance agent if you happen to fit one of the insurance company’s desired client profiles. In these cases, fitting into one of these job types saves you money on your car insurance.
What you do professionally may also change the driver classification from commuter to business use if you’re a realtor or outside sales / support person. In these instances, it can raise the amount you pay for insurance.
If you’re a stay at home parent raising the next generation, you may also qualify as a pleasure driver. This depends on the amount of driving you do, but if you are a pleasure driver, you’ll pay less for your car insurance than someone who commutes to an office every day.
I’ve had some people tell me these factors aren’t fair, but most people are glad I ask these questions. They understand, once I’ve explained why I ask these questions, that I’m truly looking to find them the best rate. If your agent doesn’t ask you these questions, then bring it up with your agent. You may get a discount you didn’t even know you are eligible. If they don’t offer these discounts, then find someone who does and compare.
Share your comments, questions, experiences, or thoughts with me in the comments section of our blog, or on our Google + and Facebook pages. I’d be delighted to hear from you!