Starting a college life is an exciting experience with a lot of changes. There are many expenses along with these changes. One of the most expensive costs is car insurance. Car insurance is an ongoing cost, with a fixed payment monthly. For most college students, money is short and they need to manage their budget efficiently. To have cost-efficient car insurance, it is important to understand the five key factors influencing car insurance rates.
Location: The insurance rates vary widely by zip code. Residents living in rural area will have lower rates, while those who living in urban area will be charged with higher rates. The principle is simple. In urban areas and cities, there are more cars on the road. For insurers, more cars on the road equals a higher potential for accidents.
What you drive: There are three types of vehicles with high car insurance rates, sports cars, luxury cars, and large vehicles. Sports cars and luxury cars usually have high market value and carry pricey repairing costs. Large vehicles are exposed to more damages due to their big size. Therefore, insurers charge higher premiums on these three types of vehicles.
Credit History: Insurance companies will look at your credit history to determine the insurance premium. If you have a good credit standing, you will have a great saving in premium costs; otherwise, you are going to pay more.
Driving Mileage: If you do not drive too often and your car has low mileage, you can expect a low car insurance rate. The insurers think that more miles represent the higher possibilities of getting into an accident.
Driving Record: Insurance companies will be cautious of drivers who cause accidents. These drivers generally pay more than those who are crash-free. Good driving habits actually can help you lower insurance costs.
I hope the discussion of the five factors above can help you feel more confident in dealing with car insurance. Just a reminder, when you purchase car insurance, please do not forget to compare different insurers to find the one that best fits your needs.
Written by: Xiaotong Tao, Financial Wellness Peer Educator, University of Illinois Extension, 2018.
Reviewed by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension.