How Third Parties In Your Area Affect Your Auto Insurance Rates

Posted on: 2 July 2019

Your age, credit score, driving history, driving experience, and gender, as well as other first-party factors, are some of the things that affect your auto insurance rates. However, there are also third-party factors that may affect your rates. Here are some of those third parties.


Auto insurance issues are generally regulated at the state level. States determine the minimum coverage level and whether you need underinsured or uninsured (UIM/UM) coverage. States also determine whether to go with the no-fault insurance or fault insurance coverage.

Thus, the insurance regulatory environment in a state has a direct bearing on the insurance rates in the state. Say two drivers both purchase their respective states minimum coverage where one state requires 20/40/10 and the other 25/50/25 (bodily injury per person, bodily injury per accident, property damage per accident). The second driver is likely to pay higher rates than the first driver due to the second driver's high limits.

Uninsured Drivers

The number of uninsured motorists varies by state. Unfortunately, uninsured drivers drive up auto insurance rates because other people indirectly cover their risks. This is particularly true if you live in a no-fault insurance state where you file a first-party insurance claim irrespective of the person at fault. Say you get injured in a head-on collision, but the other driver doesn't have coverage. The insurance industry has to pay the compensation money even though it only collected premiums from one driver. This leads to high costs of business for insurance carriers that are passed on to drivers.

Thieves and Vandals

Thieves and vandals affect comprehensive insurance rates. This is because it is your comprehensive coverage that will come to your rescue if your car is stolen or if the neighborhood goons wreck your car. If several of these incidents happen in a neighborhood, the insurance companies categorize the area as a high-risk area. As a result, those who purchase comprehensive coverage in the area have to pay higher rates than they would have paid in a low-risk neighborhood.

Negligent Drivers

Lastly, negligent drivers who cause accidents also affect your auto insurance rates. This is because auto accidents are the primary trigger of auto insurance claims. The more accidents occur in an area, the higher drivers in that area will pay for insurance. Thus, if you live in a neighborhood with many negligent drivers, your rates may rise even if you are a good driver.

As you can see, there are things you can control and things you cannot control when it comes to auto insurance rates. Focus on the things you can control to manage your rates. If you suspect that your current rates are high, consult an insurance agent to help you asses your coverage and advise you on how you can enjoy better rates.

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