Why some drivers pay more for car insurance

0:00- So let's talk a little bit about the things that might increase or decrease the cost of your car insurance. And we're talking about cost. We've covered this in other videos. We're talking about the premium. That is what you are paying in order to get the insurance.

0:13So at a very high level, you first need to think about, well, what are you covering? So if you are only doing liability insurance and you get into an accident that damages your car, the insurance doesn't cover that. Liability insurance is just that if you, by virtue, or not virtue, by unfortunate situation of getting into an accident, you hurt someone and you have liability for it, then the insurance will pay.

0:41But if you just have liability insurance, the actual damage to your car will not be covered. And so you might say, why would someone do that? Well, they might say, okay, well, I have an old car. It's not worth that much anyway. Or you might say, Hey, look, I have enough money that if my car gets damaged, I can pay for it myself.

0:59Sometimes you don't have a choice. For example, if you have borrowed money against the car, you still owe the money to the bank and if you're not able to pay it back, they get the car. Well, they're going to force you to get full coverage, comprehensive coverage on that actual car because if you got into an accident, it's not an option that like, well, maybe I didn't need that car.

1:21No, you need to get that car back because you borrowed money against it. Now, what also could matter, especially if you're getting comprehensive, is the type of car. In general, the more expensive the car, the higher the premium, especially for comprehensive insurance.

1:37When we're talking about either liability or comprehensive, it still might go higher depending on the type of car. These insurance companies, they have actuaries, which are really statisticians who are constantly looking at based on different things, what's the probability that you're going to get into a car accident?

1:52So for example, they might statistically see that someone who drives a red, super fancy, expensive sports car, not only would that be more expensive to repair if it were to get into an accident, but they're more likely to get into an accident. Maybe they drive faster, who knows?

2:08And because of that, you have to pay higher in liability too. Now, in that same vein, they're looking at all sorts of things, including demographic information. Some of the big ones are age, gender, and you're driving. Well, let's just go with age and gender for now.

2:27If you are a teenager, you're going to pay a higher premium, whether it's liability or comprehensive than if you're in your 20s and if you go beyond your 20s, et cetera, et cetera, the premium is likely to go lower as you get older. Now, why is that? Again, well, these statisticians at the insurance companies probably see that once you get past a certain age, especially if you have a clean driving record, that you are less likely to get into an accident.

2:54And that gets me into the next topic, which is your actual driving record. How many accidents, how many tickets, especially moving violations. Moving violations are things like speeding or running a red light do you have? And every time you have an accident or moving violation, et cetera, that will likely increase your premium because by these statistical models, you are more likely to get into an accident.

3:19Now, what are things that you could do to actually lower your premium, especially even if you're fairly young? A lot of insurance companies give discounts for folks who are good students where you can show them your report card. They've seen, once again, statistically, that good students maybe have less accidents than people who don't get as good grades.

3:36Oftentimes you could take Driver's Ed courses or defensive driving courses and those statistically maybe lower your probability and the insurance company could respect that. Now, other things that could factor in is how much you drive. If you barely drive a car then, you know, the number of miles a year is if you're driving 2,000 miles a year and someone else is driving 20,000 miles a year, and y'all are equally risky or equally safe per mile, well, you are still cheaper to insure statistically because you're less likely to get into an accident because you're only driving 2,000 miles a year.

4:14Similarly, where you're located or where your car is parked. If you have to take that car into a part of town that tends to have more property damage, thefts, et cetera, or just traffic accidents, well, that might be a higher cost than if your car is just staying in your driveway in a part of town that's unlikely to get in trouble.

4:38So big picture, these are all things. Oh no, the last thing I'll say is your deductible. Remember, the deductible is what you have to pay before the insurance kicks in. The higher the deductible, the lower the premium because once again, you have to pay a lot more out of pocket and you're not going to be necessarily making as many claims on the insurance because you're going to be paying up to the deductible on that first.