Auto insurance is mandatory if you plan on driving a vehicle, regardless of where you live. There are tons of companies which offer insurance, so it’s important to know if you are getting a good rate or not. Many different aspects go into an auto insurance rate. The kind of car you drive, your driving history, and where you live will all be considered when an insurance company figures in your rate. Depending upon where you live, there are many factors that will determine your rate.

State Minimums

Different states require different minimum coverage for auto insurance. As a driver, you’ll need to carry what’s considered the minimum coverage. This PIP or Personal injury protection, property damage, and bodily injury liability. Bodily injury liability is two-fold. You’ll see two numbers when it comes to bodily liability. It includes for one individual injured in the accident as well as total injuries for the accident.

When getting insurance quotes, you’ll often see the coverage listed with three numbers and slashes. This would look like: 25/50/25, for example. This would mean that the first number is representative of bodily injury for an individual. The second number is the Bodily injury for the entire accident and the third number is the PIP. Each state differentiates between the minimum overages.

Should you be involved in accident outside of your own state, you are still covered. If you have Florida insurance, which has lower minimums than say New York, your insurance will automatically expand to cover you.

The state minimums are just that – minimums. Basic guidelines of what you absolutely have to have. If you want more than that, you are welcome to it. Many insurance agents, upon looking at your driving history, may make recommendations for higher coverage in certain categories. Whether you take the advice or not is entirely up to you.

Insurance is a little bit of a gamble when it comes to minimums. If you go based upon the minimums only and you are involved in an accident, those numbers are representative of what will be paid. The rest you are out of pocket for. With most accidents, the minimums are plenty. However, if you feel that you may need more, then you may want to pay the money up front for a higher level of liability.

Fault vs. No Fault

Each state is either a fault or no fault state. This will affect auto insurance rates, too. A state that is an at fault state means that one of the parties involved in an accident will be found at fault. This usually means that someone will also be issued a ticket upon arrival of law enforcement.

States that are at fault will naturally have higher premiums. This means that one person (therefore one insurance company) will be responsible for all damages as it pertains to the accident. Insurance companies then have to compensate for that added cost by passing it on to their customers.

There are more states that are no fault versus fault. Should you live in a state that establishes fault, you will be paying a slightly higher premium, but the good news is – so will everyone else in the state. That doesn’t mean you can’t find affordable auto insurance rates. By showing that you’re a safe driver and driving a safer rated car, you can still pay less than someone with a bad driving history in a no fault state.

Fault can be a very tricky thing when involved in an accident. If someone must be found at fault when there is really no one to blame, it is up to law enforcement. Fair or not, that person will be responsible for the damages. And so will their insurance company. But if you live in a fault state, that’s the rules of the game. Knowing this, however, will help explain a higher rate than being in a no fault state. Understanding that this is a contributor in calculating auto insurance rates, you’ll be able to find low rates that encompass everything that you want.

Commuting

When it comes to getting an auto insurance rate, you will be asked what you use your car for. Is it for personal use or business use? How many miles on average do you drive your car? Is it for commuting to and from work? How far is work?

All of these questions will help an insurance company calculate your insurance premium. If you live far away from your work, you’ll be commuting more. This extended commute time means more miles between point A and point B in which you could be involved in an accident. Insurance companies charge appropriately as a result of this. If two people have exactly the same criteria for everything, but one person lives farther than the other, the person who lives farther from their job than the other one will find themselves with a slightly higher premium.

The amount of miles driven on a daily basis will be just one factor. Whether you use your car for business or simple commuting will also be factored in. If you do deliveries or are in sales, or any other job in which you do a lot of driving, it will affect your rate. The more you drive, the more chance you’ve got of being involved in a fender bender with another vehicle, whether it was your fault or not. A person who just goes back and forth to work versus one that leaves their home and is on the road the entire day will pay different rates.

Talking to your insurance company about your commute time and amount of driving will establish a portion of your rate. The more they know about how much you drive, the more it will allow them to customize the rate for you. Also, if you know that your premium is going up based upon the amount of driving you do for work, you may want to talk to your job to see what they can do. Some companies will give you a higher rate of pay or allow you to expense a portion of your travel costs to compensate for higher auto insurance premiums. Now that you know that your commute will play a role in what you pay for auto insurance, you’ll be able to make a clearer choice in shopping for cheap rates.

Rural vs. Metropolitan

The area in which you live are classified as rural, suburban and urban (or metropolitan). Rural areas typically have a history of fewer accidents. The closer you get to urban areas, the higher the percentage of being involved in an accident. Manhattan is metropolitan. There are many accidents there every day. Then there are little towns off the beaten path in the country. Those would be rural. There may be one accident there every year. See the difference?

If you live in a rural area, you’ll be given a price break. It is unlikely that you’ll be involved in an accident because there’s not enough traffic to raise those chances. Once you start traveling closer and closer to a Metropolitan city, those chances skyrocket and therefore insurance companies base their rates upon those chances.

Dirt roads versus high traffic cities are much different. Population sizes help determine how a city or town is classified. There’s a trade-off for everything. Living in a highly populated city might mean benefits like nearby shopping centers and more entertainment, but it comes at a cost – higher insurance. Those that live farther away from all of this are rewarded with the lower insurance rate. As long as you take into consideration where you live when you are given a car insurance rate, you’ll be able to more effectively shop for a low rate.

Road Hazards

Many rates look at what kind of road hazards could occur in certain states. Mountainous terrain, ice, sleet, snow, and rain are all road hazards that can contribute to a higher auto insurance rate. The more of these hazards that could potentially occur in one state, the higher the premium. Take a look around your state.

Does it snow? Do you get icy results as a result of it? Then you may be destined to pay a higher rate because of it. That’s because when there is snow and ice, more accidents occur.

What about rain? States in the Southern region, such as Florida deal with a lot of rain, hurricanes and flooding. Just like home owner’s insurance has flood zones where people are expected to pay more, the auto insurance companies look at these things, too. If you have the potential to be driving in a lot of rain, through high water and other wet conditions, you’ve got a higher chance of being involved in an accident. This higher chance equates to a higher insurance rate.

Every state has at least one road hazard. If a state has two, than the rate is higher than a state with only one. If a state encompasses many of the hazards including rain, snow, and mountainous terrain, than its drivers are more likely to be involved in an accident as a result of these hazards. As it pertains to shopping for rates, take into consideration road hazards when your rate is higher than someone you know in a state with less road hazards. You must remember to compare apples to apples instead of apples to oranges. All states were not created equally.

States That Can Check Credit History

Some states are allowed to check your credit history to determine auto insurance rates. They create an insurance score based upon your credit history, looking at bankruptcy filings, collection agencies, payment history and other things.

The insurance score will look at payment history, length of credit history, whether you are maxed out on credit cards or within your limits, what kinds of credit cards are in use and the number of new credit applications recently requested. When an insurance company calculates the score, they do not take into account income, gender, religion, race, marital status or national origin. They only review your credit history. This insurance score will help determine your rate.

The insurance score will determine two things. Your rate and the frequency in which you pay your premiums. The higher your credit score, the higher your insurance score, and therefore the lower your auto insurance rate will be. If you have a low credit score, you will be paying more if you live in a state in which they check credit scores. Not all states do, so you may want to ask your insurance company if they used your credit to establish your rate.

If your state uses credit history, you can ask for your rate to be re-evaluated. If you have had your insurance company and the same premium for awhile and you’ve recently improved your credit score due to better payment history or other factors, call them to see if they can pull a new credit report and thus calculate a new insurance score. You may find yourself reducing your payment by a few dollars each month.

The second thing about the insurance score is the frequency in which you pay your premiums. If a person has a particularly low insurance score, the auto insurance company may require them to pay for the entire policy coverage time up front, rather than being able to pay monthly. This is because a person’s insurance score doesn’t show well for paying bills on time (or at all).

It’s important to check with your auto insurance provider when shopping for rates whether they check your credit history. It’s a good thing to find out what is encompassed in your rate and if it’s because of bad credit, you know that there are things you can do to eventually improve the premium that you’re paying.

Auto insurance rates are absolutely dependant upon where you live. There are things that you simply cannot control, including what the state minimum liability coverage are and whether it’s a no fault state or not. Those are pretty set in stone. You can choose whether you live in the city or not and how far you commute when you decide to settle down within a new place. Though, realistically, are you really going to commute a long ways just to settle in a rural town?

So how can you lower your car insurance rates when the state controls so many aspects?

The car you drive, your driving history, and your age all go into a car insurance rate as well. Obviously, you won’t be able to do anything about your age. However, those with teenagers in the house that will be using the car, or teenagers themselves, will find that they are paying a higher insurance rate.

The car you drive will affect your rates, too. Rollover rates, safety star ratings and other factors will help determine whether it’s considered safe or not. A safer car will insure at a lower rate than others. A four door sedan will have a lower rate than that of a two door convertible. That’s because the chances of being involved in an accident is significantly lower in the sedan.

Your driving history, too, will affect your rates. The number of tickets and past accidents will be taken into consideration. If you have had multiple accidents in the past, insurance companies will assume that it’s a trend and will offer you a higher rate in order to protect themselves in event that you are involved in an accident.

It all comes back to the gamble that insurance companies have to make when insuring someone. The amount of money they collect from you over the course of your time with them won’t be enough if you get into a serious accident. Therefore, they will need to spend more of their money to cover all of the costs. They don’t like when this happens, so they try and charge as much as possible up front so that, should an accident occur, they aren’t out too much money.

Knowing what your insurance rate is compromised of will help to make sense of the rate quote you’re given. Only then can you truly shop comparatively for cheaper auto insurance rates. Where you live is a huge contributor into your rates because it encompasses state minimums, faults, commutes, and possible road hazards. They all play a role in how an insurance company calculates insurance based upon the chances of one of its insured customers getting into an accident. The less likely a person will get into an accident, the more they’ll be rewarded with a great rate. Insurance companies are constantly in competition with each other for getting the most business. This benefits the consumer because some insurance companies are willing to overlook certain factors in order to gain business. The more you know about what goes into your rate, you’ll know whether you are getting a good deal or not and what you can do differently to make your rate go lower.