Vehicle insurance companies are allowed to consider many factors as indication of risk when calculating premiums and many of these metrics favor wealthier motorists. In a way, there is not much surprise there because you can buy a safer automobile, live in a nice zip code and have a great credit score if you have no money problems and the opposite is true as well.
A richer person who owns and lives in a nice home in the suburbs, has a great credit score, holds a university degree and has a respectable profession can get great auto insurance rates. On the contrary, a single mother who rents a city center apartment in a poor neighborhood and has a blue-collar job is not probably going to get as good a rate as the rich guy even if she has impeccable driving record and no claims for years. This point has been proved many times by getting quotes for various profiles.
Overall, you have a much better chance of getting great rates if you were rich. This is still true even if you don’t have great driving history or claim records as those discounts for good credit score can be as high as a good driver discount. On the face of it, this is something you have to accept but it is possible to play the game no matter how worse off you are.
Let’s have a look at these factors affecting vehicle insurance rates;
Zip Codes and Premiums
To be fair, where you live should affect how much premium you pay. You are likely to drive around your home and your automobile is parked in that neighborhood at night. Congestion, auto theft, vandalism and claim history in your location tell a lot about the chance of you making a claim on your policy. That is why it is only fair that companies look at those statistics and include them in their rates.
Nevertheless, it is not clear how each company integrates zip code analysis into their premium calculation formulas. There are many complaints that certain zip codes are charged way more vehicle insurance premiums than their neighboring areas. There are open suggestions in the press that companies take it to a point of redlining certain zip codes. They appear to be charging a lot more for the residents than it can be justified with the losses they suffered there.
What Can You Do About It?
If you are stuck in a certain zip code because you cannot find apartments in your budget anywhere else or for any other reason there is not much you can do. Certainly, it is not a good idea to forgo auto insurance although this may be a common problem in poorer parts of larger cities. Actually, knowing this fact should make you want to buy coverage even more because you have more people driving without insurance in your area.
If you are looking for a new place to live and have some flexibility you may be able to avoid ending up in an expensive vehicle insurance zip code. You can always check the possible quotes if you were to move to a given address on a car insurance comparison website and find out the costs. If you have two or three possible locations you can get quotes for all of them. Each online quotation takes about ten minutes.
Generally, you should try to avoid highly populated and congested city center locations. As you move out from the center towards the suburbs your rates should come down more and more.
If you have no money problem and you are capable of paying your bills in time you are more likely to have a great credit score. Having a great credit record can save you as much as twenty percent on automobile insurance. When you are struggling with bills you are more likely to miss or fail to pay one or two of them in time and that makes you lose out on savings.
When you own your home, most companies will offer you lower premiums. Having a good education and a reputable profession are going to help you as well. When you have sufficient money in the bank you can pay your premium upfront which would qualify you for further automobile insurance savings with some companies. If you want to spread the premiums you will probably have to pay additional fees or interest charges.
You should learn how you can qualify for all these discounts and ask for them the moment you do. Many policyholders don’t communicate with their insurers well enough. Some are worried that the more information they share the more they will get charged. This is not true and you can actually save more by letting them know the changes in your life.
One thing is for sure that you get large discounts if you don’t have traffic tickets and claims to your name. So, you should try to keep it clean and improve your credit score where possible. Managing your money can allow you to get out of trouble. You can get credit cards and lower interest mortgage and personal loans with a good credit score.
Also, you should always remember to shop around. Companies have different rating systems and you need to find the ones that offer you the largest discounts for your qualifications. For example, while company A is offering only ten percent discounts for having a good driving record, company B can offer as much as thirty percent. If you don’t do yourself a favor and shop around you cannot blame car insurers for charging you whatever they like.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.