Did You Know Your Zip Code Affects Your Insurance Rates?
Most vehicle owners understand that having a safe driving record, a car with a lot of safety features, and a moderately priced vehicle will result in lower insurance rates, but what about where you live? Can moving a few blocks cause your car insurance rate to go up or down? Yes, and you’re about to find out why.
When auto insurers set rates for insurance policies, there are many factors that are taken into consideration. They employ skilled actuaries who develop risk factors by gathering data across many areas of information that are available to them such as information about your vehicle, information from your driving record, information about you (credit score, age, marital status), and information about your neighborhood. What happens in the area you live does have an impact on your insurance premium, and these are the specific characteristics they look at:
Auto Theft and Vandalism
Data shows that theft is more abundant in urban areas, especially around larger cities. When you move to an area where auto theft is fairly common, it’s going to increase your comprehensive auto insurance rates since that part of your policy pays for stolen vehicles. Where there is theft, there are typically more vandalism reports as well. Graffiti is one of the primary nuisances in urban areas, especially near parked rail cars. The cost to get dried graffiti paint removed from an expensive paint job can be significant so therefore insurance rates will increase accordingly. What happens in your zip code doesn’t stay in your zip code because the majority of personal auto insurers report all claim activity to the Comprehensive Loss Underwriting Exchange (C.L.U.E.). The data accumulated by CLUE is used by insurance carriers to set insurance rates, according to claim type and, you guessed it, where the claim happened.
Population and Number of Registered Vehicles
It’s certainly logical that the more vehicles are driving in a given area, the more likely it is that they will make contact. High population density and high registered auto density equals higher auto insurance rates. The effect is across the board of your policy coverage. As you might have already considered, areas that have fewer drivers and fewer vehicles, such as a country town, will experience lower rates since there are far fewer automobile accidents.
Just as natural disasters affect homeowners insurance, hurricanes, tornadoes, and hailstorms affect auto insurance as well. When a natural disaster causes damage to neighborhood homes, vehicles in the neighborhood are damaged, too. Insurers use this data to identify areas of the country with considerable natural disaster history and factor the rates accordingly. For example, if you live in an area that is known for flooding, you guessed it, your auto insurance rates will be higher than if you didn’t.
Since the CLUE data reveals the type of insurance claim, the reason for it, and the amount paid by the insurer, insurance actuaries will be able to mine that data and develop other exposures, such as behaviors, to use for setting insurance rates.
If you are concerned about whether your auto insurance will go up because you are moving into a different area, give your agent or broker a call and ask them to do a “what if” with the new zip code you are considering. In fact, you would be more informed if you could provide an exact address because some companies have even gone as far as refining rates into sub-areas within zip codes. There are instances where an apartment address on one side of a complex has a higher rate than an apartment address on the other side of the same complex.
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