A few weeks ago we looked into the main factors that impact car insurance rates. Some factors are personal — say, an accident, traffic ticket, or policy change. But insurance is ultimately about pooled risk, and other factors are common to an entire ZIP code, region, or state — things like crime, natural disasters, or a tendency toward riskier driving.
So what might that look like in real life? To speak very broadly, your risk falls into three categories: your driving, your car, your surroundings. Today we’re diving in again to explore some specific circumstances that could prompt a change to your insurance bill.
Same safe driver, different roads
Imagine you’re a safe driver, without a ticket or accident in recent memory. You move from a small town to a larger city, bringing your safe driving habits along with you. Here’s the trouble: there are a lot more cars in that larger city, a lot more traffic, and probably a higher likelihood of an accident. Even though you haven’t changed, the roads you’re driving on have. That affects risk, and thus rates.
Same driver, new car
Life is good, and you’ve treated yo’ self to a new ride. This might not affect the likelihood of an accident, but it could affect the cost of an accident were you to have one. New cars come with fussy on-board technology, expensive parts, and fancy safety features, all of which has recently tended to make car repair more expensive. In insurance jargon, this is known as “severity”; even if the frequency of crashes stays the same, they’re more expensive (severe) when they happen.
Same driver, same roads, different neighbors
Remember how we said insurance is about pooled risk? Well, just like moving to a new area can impact the risk around you, so too can changes to your area. Maybe your area is popular, and more people have moved there. Maybe it’s experienced a rash of car thefts. Maybe your mild-mannered neighbors moved away, and drivers with riskier habits moved in. You might notice this moving the needle come renewal time.
Same roads, new driver
You haven’t moved, you haven’t changed cars, and your neighborhood is just as safe as always. One big change, though: your teenager started driving and was added to your policy. A new driver can be risky — especially when that driver has a teenage brain. You’ll almost certainly see a new driver reflected in your rate.
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Note that in many of these and similar circumstances, the reverse might also hold true; you could find yourself with a lower car insurance bill after moving out of a crowded city, shifting to a less expensive car, or if your neighbors start having fewer accidents.
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Jeff Rutledge is Sr. Manager of Communications at Metromile.