It may be frustrating to learn that your homeowner and car insurance policies are more expensive than your neighbor or a friend who lives on the next road over. However, there are many factors that go into the pricing of insurance. Rates can vary for a number of reasons. As we discuss the factors that influence insurance rates, you may find something that you can change or that has changed recently in your life that may help bring the cost of your policy down!
Car Insurance
Policy Details
There could be a number of factors at play here. Your neighbor may have decreased their coverage limits. If they own their vehicle outright, they could have dropped optional coverages, such as collision and comprehensive. They may have a higher deductible. The deductible is the amount you will pay out-of-pocket in the event of a claim. A higher deductible will result in a lower rate. Any of these factors could result in a lower rate even with the exact same car. If you are trying to lower your insurance cost this way, make sure you can cover the out-of-pocket expenses that you’ll incur with a claim.
Not all auto policies are the same. Many insurance companies differ in their policies to offer unique or better coverages than others. What you pay for often factors in the level of coverage you are getting for your money. There are numerous possible components to your auto policy…OEM parts coverage, agreed value versus deprecated, rental car limits, Domestic Auto liability to International Auto liability, uninsured motorist coverage and more. While you may appreciate the coverage you have, you really never know how good someone else’s policy really is.
Type of Car and How Many Cars You Insure Matters
The type of car you drive makes a difference in rate. Certain types of cars are more likely to be stolen or have parts stolen. A vehicle that costs more to repair or replace is going to be more expensive to insure. Safety features like lane departure warning systems can shave money off your bill. Let your insurance professional at Nicholas / Tobin Insurance know what type of safety features your car is equipped with. If your neighbor drives a Subaru and you’re driving a sports car, your insurance rates will reflect that. If you want to know what the least expensive cars to insure are, this report will help.
The more cars you have on your policy, the lower your rates will be.
Driving Record
If you’ve never had an accident or a speeding ticket, you’re going to receive a better rate. A speeding ticket can raise your insurance rates by 3-4%. If you were at fault in an accident, you could see your rate increase as much as 49%. A claim for a minor at-fault accident will usually stay on your record for about 5 years. If you’re involved in a hit-and-run or are arrested for driving under the influence, it will stay on your record for 8-10 years.
Demographics (and Youth)
Those that are married usually tend to have better driving records than those that are single. Thus, married couples are considered less of a risk. Likewise, men tend to get into more car accidents than women, so women’s car insurance costs are generally lower. Age also plays a factor. The older you are, the lower your rates tend to be. However, once you become a senior citizen, your rates will start to rise again.
Profession
Interestingly enough, what you do for a living also affects your car insurance rates. If you have an occupation with a history of high risk, and your neighbor doesn’t, your car insurance rates are likely to be higher. Jobs like lawyer, chef, salesperson, or business executive tend to be higher stress with long and irregular hours. On the other hand, jobs that revolve around the safety of others like pilot or scientist, tend to be looked upon more favorably by insurers, resulting in a lower rate.
First responders who drive work vehicles much of the time, rather than their own, also tend to have lower rates. Other jobs that tend to receive rate discounts are architect, engineer, accountant, doctor, dentist, nurse, teacher, librarian, and college professor. If you’re a lawyer, and your neighbor is an engineer, his car insurance rate is probably going to be lower unless he has other risk factors.
How Far You Drive
Low mileage drivers such as those who work in the same community in which they live tend to have lower rates. The same goes for those who work remotely from home. If you’re on the road less, you’re less likely to file a claim. So if your neighbor works in the same town you live in, and you’re commuting to an office an hour away, your rate is most likely going to reflect that.
Home Insurance
Your home is as unique as you are…age, construction materials both outside and inside, updates to the home (electrical, plumbing), security system, and more. Not only is the home itself unique, so are your needs and coverages for your possessions. Contents coverage limit, along with riders for valuables and Jewelry all play a role in what you are insuring and what you are paying for. Yet your homeowner’s insurance is only partially about the home itself. Another important factor is liability coverage. From how much you have to who you are, does matter. One would argue that your liability coverage is more important than the possession you are trying to protect. It’s your liability coverage that protects you and your assets from a lawsuit. Having the right liability limit is one that fits your needs and concerns, which means not everyone has the same level of liability coverage.
Deductibles and Limits
Like car insurance, deductibles and limits are two of the biggest costs associated with homeowner’s insurance. A high deductible will mean a lower premium, but you should make sure you are able to cover the deductible amount in the event of a claim. You should also understand the difference between actual cash value and replacement cost and know what type of insurance you have.
Actual cash value will cost you less, but if you have a catastrophic loss such as your entire home destroyed by fire, actual cash value will only reimburse you for your home and the contents at a depreciated rate. Replacement cost will cover the cost to replace your home with one comparable to the one destroyed by the fire and the contents at current market value. Items like expensive artwork, jewelry, and collector’s items need a special rider for coverage. While your homeowner’s policy does cover damaged or stolen items, typically your coverage is limited to between $1000-$5000 after your deductible. Having a rider allows you to insure costly items at their cost or value, which you will need a certified appraisal for. When you’re comparing rates with your neighbors, chances are your policies are different.
Claims and Risk
Claims and risk affect your rate. A homeowner with multiple claims will see their rates rise accordingly versus a neighbor with no claims. Risk follows along the same line. If you’ve filed a claim for a chimney fire because you didn’t have your chimney cleaned, your insurer is likely to see you as a riskier candidate to insure than someone who has never had this issue.
Upgrades to Your Home
Upgrades like a home security system, water shut-off devices, storm-safe windows or a new roof will net you discounts on your homeowner’s insurance. If your neighbor’s home has been updated with any of these types of upgrades (and yours has not), their rates will reflect discounts you aren’t eligible for.
Proximity to emergency services
The closer you live to a police department or fire station, the faster they can respond in the event of a break-in or a fire. If you live in a city with multiple stations, area lines could be drawn to where two neighbors across the street from one another could be served by two stations, one being further away than the other, affecting insurance rates as well.
Umbrella Policies
It’s possible your neighbor doesn’t have an umbrella policy. Umbrella insurance is a secondary insurance that supplements your homeowner’s and car insurance. It pays out after the liability limits of those insurances have been exhausted. If someone gets seriously hurt on your property, having umbrella insurance could help preserve your assets and keep you from suffering a catastrophic loss. If you have a pool or trampoline in your yard, they are both considered attractive nuisances by your insurer. An attractive nuisance is something that can attract children onto your property. If a child attracted to your property by an attractive nuisance is injured, you will most likely be considered liable. Umbrella insurance is relatively inexpensive and may add a few hundred dollars to your overall bill. But, it will help give you peace of mind in the event of a lawsuit.
Other Factors Affecting Your Insurance Rates
Credit Rating
The higher your credit score, the lower your insurance rate. Insurers feel that someone with a higher credit rating is less likely to be in an accident or file a claim. You’re probably not discussing your credit rating with your neighbor, but you should be aware that it is a factor.
How You Pay Your Policy
Lastly, paying for your policy for the year in full is likely to cost significantly less than paying for it monthly.
Insurance rates have many variables. Now that you know the kind of factors that affect the cost, you can make changes to help your rate going forward. Let your insurance professional at Nicholas / Tobin know if there are any recent changes in your life that would affect your homeowner’s or car insurance.
Nicholas / Tobin Insurance, located in New Milford, Connecticut, provides its clients’ the highest quality insurance products and services available today to protect them, their families, and businesses. We offer homeowners insurance, renter’s insurance, car insurance, business insurance, travel insurance and more! Our commitment to service means our team of licensed insurance professionals is here to help with simple policy questions, consult with you to determine appropriate coverages and be available 24/7 when trouble strikes, and you need assistance managing through the claim process.