• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

What insurers consider when setting premiums

Some of the factors used to calculate your premiums are pretty obvious, like how much it would cost to replace or repair the car if it got in an accident. So, yes, that pricey and sophisticated Tesla will cost a fortune to insure.

Certain models are also, statistically speaking, more likely to get into a crash. A three-year-old minivan is probably driven by a responsible parent who would never risk the safety of their kids in the backseat. A brand-new sports car, not so much.

Of course, personal factors like your driving record, age and gender matter, too. Your ZIP code can play a role, if you live in an area with a high rate of theft.

And even though many people don’t realize it, your credit score can actually drive up your premiums.

While some states don’t allow insurance companies to use credit scores directly, insurers can still draw up an “insurance” score using data in your credit report.

Research suggests that people with debt, bankruptcies or a history of late payments are more likely to file insurance claims — so if your credit score isn’t up to snuff, your insurance score won’t be either.

More: Estimate monthly spends with car loan calculator

Stop overpaying for home insurance

Home insurance is an essential expense – one that can often be pricey. You can lower your monthly recurring expenses by finding a more economical alternative for home insurance.

Officialhomeinsurance can help you do just that. Their online marketplace of vetted home insurance providers allows you to quickly shop around for rates from the country’s top insurance companies, and ensure you’re paying the lowest price possible for your home insurance.

Explore better rates

Why cheap cars don't always get the best rates

None of the above really explains why Larry gets a much better deal on insurance for his Pilot than Jim with his CR-V.

In many cases, the difference can be explained once a driver looks into their car’s safety features.

For instance, the Honda CR-V — which ValuePenguin found to be one of the most affordable cars to insure — earned a Top Safety Pick designation from the Insurance Institute for Highway Safety this year.

If a car holds up better in a crash, causing less damage to the vehicle or the fragile humans inside, that can mean big savings for insurers. After all, a single serious injury can mean years of costly tests, drugs, therapy and surgery.

For that reason, a more expensive vehicle loaded with accident-avoidance and crash-safety features can give insurers the confidence to lower premiums.

That’s not all. Some cheaper car models are more likely to be stolen. While missing anti-theft features can be a problem, crooks sometimes prefer to target cheap, common cars so they can use them for other crimes while remaining incognito.

Lastly, it’s a lot easier to find replacement parts for cars that sold well. Undesirable clunkers are cheap to buy, but the insurer may have to pay a disproportionately high price for repairs.

How to find affordable insurance

When looking for a new car, savvy shoppers will want to investigate whether their top picks are statistically more likely to wind up in an accident and which safety features are included.

Rates also tend to decline as vehicles age, so buying a used or year-old car can get you your desired model while keeping expenses down.

But ultimately, the best way to save on an insurance policy is to shop around for the best rate. Each insurer weighs the factors that go into your premiums in different ways, so you’ll find that prices can vary widely.

The Insurance Information Institute recommends comparing at least three different quotes before you settle on an offer.

Whether you drive a Honda or a Tesla, shopping around will ensure you’ll always get the best price for your own insurance — regardless of what the guy down the street is paying.

Sponsored

This 2 minute move could knock $500/year off your car insurance in 2024

OfficialCarInsurance.com lets you compare quotes from trusted brands, such as Progressive, Allstate and GEICO to make sure you're getting the best deal.

You can switch to a more affordable auto insurance option in 2 minutes by providing some information about yourself and your vehicle and choosing from their tailor-made results. Find offers as low as $29 a month.

Sigrid Forberg Associate Editor

Sigrid’s is Moneywise.com's associate editor, and she has also worked as a reporter and staff writer on the Moneywise team.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter. Advertisers are not responsible for the content of this site, including any editorials or reviews that may appear on this site. For complete and current information on any advertiser product, please visit their website.