AutoInsurance.org recently released its list of the 12 most significant factors that affect auto insurance. While most people aren't surprised to read a driver's history of accidents and traffic violations made the list, many did not expect to see credit score matters as much as it does.
According to the report, a low credit score could result in up to 60% higher car insurance rates. With that much at stake, insurance policyholders should look for ways to improve their credit.
Melanie Musson, nationally recognized car insurance expert with AutoInsurance.org, said, "It's unlikely an insurer will run a policyholder's credit once their policy is established. Since credit score significantly impacts rates, the policyholder should request an updated credit report check."
The practice of relying on credit reports to determine auto insurance premiums is controversial. Insurance providers point to the statistical connection between lower credit scores and an increased risk of claims filing. Still, several states have legislation banning or restricting insurers from using credit scores for assessing risk.
In addition to credit score, AutoInsurance.org lists the following factors as contributing to insurance premiums:
- State requirements
- Policyholder age
- Vehicle make and model
- High-risk traffic violations
- Driving record
- Marital status
- Gender
- Annual mileage
- Driving experience
- Location
- Driving history
Some other factors in this list are as controversial as credit scores. And one of those is location. Insurance companies using location to calculate rates have prompted opponents to accuse insurers of discriminating against policyholders in specific neighborhoods.
Insurers have a reason for this practice though. Individuals who live in areas of high traffic and high crime have a greater risk of being involved in an accident or having their vehicle vandalized or stolen. Insurers couldn't stay solvent if they didn't accurately analyze their risk when underwriting policies.
AutoInsurance.org provides tips for reducing auto insurance costs, no matter the individual's risk level. Those tips include the following:
- Check for discounts
- Opt for lower coverage levels
- Raise the deductible
- Reduce annual mileage
- Shop for new coverage
Read AutoInsurance.org's entire report here: Factors That Affect Auto Insurance Rates (2023).
Source: AutoInsurance.org
