What Really Determines Your Car Insurance Premiums

Drivers across the U.S. may have noticed their auto insurance premiums rising recently. Unfortunately, they are not imagining things, nor are they alone - according to a report from insurance marketplace Zebra discussed in The Washington Post, car insurance premiums have risen at a rate two times faster than inflation  in recent years. The average American driver now pays an estimated $1,427 per year for coverage that is almost universally mandated by law.

This trend toward higher premiums naturally raises the questions: What determines car insurance premiums, exactly? And furthermore, are there ways to lower your auto insurance premium beyond simply switching carriers?

Mileage might only make a dent

While drivers might be facing sticker shock thanks to now-higher premiums, they might be equally surprised to learn that some popular tactics to lower your auto insurance premium are not always effective. For example, it stands to reason that in most cases, drivers who consistently log fewer miles than average can expect lower premiums as a result. However, a recent report from the Consumer Federation of America  found this to be false in most cases.

"Only in California, where consumer protection law requires it, do insurers consistently reward customers for driving fewer miles," the CFA explained in a press release about the study. While some savings are possible by driving less, the CFA found that in cities surveyed outside of California, the premiums paid by very low-mileage drivers (who logged around 2,500 miles per year) saved only $102 - around 6 percent annually - compared to very high-mileage drivers (logging 22,500 miles per year).

The difference for California motorists is rather significant. Using these same classifications for high- and low-mileage drivers, the latter group could expect to see savings of around 30 percent per year.

What should drivers take away from these findings? While some might take it as another excuse to relocate to the Golden State, there are still more practical ways to lower your auto insurance premiums no matter where you live.

Shop and save on premiums

This might be possible with something as simple as a chat with your insurance agent. If you are in fact a low-mileage driver and plan on staying that way, it never hurts to broach the topic and ask your agent if there is any leeway on premium prices. 

Otherwise, the biggest savings on insurance can almost always be found by taking your business elsewhere. Use new online tools to gather quotes from multiple insurers at once. Then, compare the details on those coverage options, paying close attention to the balance between your premiums and your deductible should you ever need to submit a claim. Finally, seek out authoritative reviews of insurers and different policies to narrow your choices down to the best, most budget-friendly option.

It's difficult to know what determines car insurance premiums exactly, as there are countless factors that go into the calculation behind every individual policy. But with a bit of extra time, you might be able to save a chunk of change without sacrificing the coverage you need.