Rerating Auto Insurance: State Farm Policy Adjustments Explained

Auto insurance rates are determined by assessing the amount of risk being insured by the policy. This risk is calculated by considering the probability of a particular event occurring and the potential impact of that event. Factors such as age, location, driving behaviour, credit score, vehicle type, and driving history can influence the probability of an accident and the potential costs involved. Insurance companies adjust their rates based on this calculated risk, typically resulting in higher rates for higher-risk individuals and lower rates for lower-risk individuals. Various discounts, bundle offers, and adjustments to policy coverages, limits, or deductibles can help manage insurance rates.

Discounts for safe driving

State Farm offers a variety of discounts for safe driving, which can be availed by customers who maintain an accident-free driving record or take steps to educate themselves on becoming better drivers. Here are some of the ways you can save on your auto insurance policy with State Farm:

Drive Safe & Save Program:

State Farm's Drive Safe & Save program offers discounts of up to 30% on your auto insurance. You can enrol in this program by downloading the Drive Safe & Save app on your smartphone. The app collects your driving information, such as mileage and driving characteristics, to calculate your discount. You get an initial participation discount of 10% just for signing up, and your discount can increase or decrease at each renewal, depending on your actual driving behaviour.

Accident-Free Discount:

If you maintain an accident-free driving record, State Farm rewards you with discounts. Specifically, if you have had a State Farm auto insurance policy for at least three consecutive years without a chargeable accident, you may qualify for a discount of up to 25%.

Defensive Driving Course Discount:

Taking a driver safety course can help you qualify for a discount on your State Farm auto insurance policy. The availability of this discount depends on your state, so be sure to check with a local State Farm agent for a list of approved courses and their requirements.

Good Driving Discount:

New State Farm customers can benefit from this discount if they have gone at least three years without an at-fault accident or traffic ticket.

Steer Clear Program:

The Steer Clear program is designed for new drivers or those under 25 years of age. By participating in this program, you can save money while learning to become a better and safer driver. The Steer Clear discount can offer savings of up to 15% on your premium.

Student Away at School Discount:

If one of the drivers listed on your State Farm auto insurance policy is a student under the age of 25 who attends school away from home and only uses a covered vehicle while visiting home, you may be eligible for a discount.

Driver Training Discount:

If all the drivers on your policy who are younger than 21 years old complete a driver education course approved by State Farm, you could qualify for a discount.

Good Student Discount:

State Farm offers a discount of up to 25% if a student listed on the policy achieves good grades (a 3.0+ GPA, ranking in the top 20% of their class, or qualifying test scores). This discount can be applied until the student turns 25.

Remember, these discounts may vary by state, and certain eligibility criteria may apply. Be sure to check with a State Farm agent to find out which discounts you qualify for and how you can take advantage of them to lower your auto insurance rates.

Factors that influence premiums

Several factors influence the premiums you pay for auto insurance. Here are some of the most common ones:

Age

Age is a significant factor in determining insurance premiums, especially for younger and older drivers. Teen drivers are considered very risky and pay the most expensive insurance premiums. Insurance companies perceive them as more likely to engage in reckless driving and are, therefore, charged higher rates. On the other hand, drivers between 25 and 65 tend to have fewer accidents and are offered lower rates. However, as drivers age, their premiums may increase again, with those over 70 paying more than those in their 50s and 60s.

Location

Your location can impact your insurance rates due to the varying risks associated with different areas. Urban areas with higher population densities tend to have higher premiums due to increased risks of theft, accidents, and vandalism. Insurance rates also vary by state, as each state has its own regulations and minimum requirements for liability insurance. For example, Michigan's no-fault state laws require drivers to carry unlimited Personal Injury Protection (PIP) coverage, making insurance more expensive.

Driving Record

Insurance companies consider your driving history when determining your premiums. A history of tickets, violations, or accidents will result in higher rates. Even one speeding ticket or accident can lead to an increase in your premiums. Insurance companies typically review your driving record for the last three to five years, but more serious violations, such as DUIs, may be considered for a longer period.

Credit History

Your credit history can significantly impact your insurance premiums, although some states restrict the use of credit information in rate determination. Drivers with poor credit scores tend to pay more for insurance than those with good credit. This is because data shows that drivers with lower credit scores file more claims, and these claims tend to be more expensive.

Years of Driving Experience

The more experience you have behind the wheel, the lower your insurance rates are likely to be. Inexperienced drivers are more prone to making mistakes, leading to higher risks and insurance costs.

Gender

Gender primarily impacts insurance rates for young drivers, with male teens paying more than female teens. This is because insurance companies perceive young male drivers as more likely to engage in risky driving behaviour.

Insurance History

Insurance companies view continuous coverage as a positive indicator. If you have gaps in your insurance history, it may suggest that you were driving uninsured, leading to higher premiums.

Annual Mileage

The number of miles you drive annually can affect your insurance rates, especially in states like California. The more you drive, the higher the chances of an accident, and thus, the higher your premiums.

Marital Status

Married drivers often pay lower insurance rates because they are perceived as more responsible and tend to share driving duties, resulting in fewer individual claims.

Claims History

A long claims history will generally lead to higher insurance premiums. If you have filed multiple claims or have been held liable for accidents, your insurance company will consider you a higher-risk driver and charge you accordingly.

Coverage Amount

The more coverage you have, the higher your insurance premiums will be. Higher coverage amounts mean that the insurance company will have to pay out more if a claim is made.

Vehicle Type and Ownership Status

The type of vehicle you own or lease and its make, model, trim, and body type can impact your premiums. Sportier and more expensive vehicles tend to be more costly to insure. Additionally, newer cars are usually worth more, leading to higher insurance rates.

Discount Options

Various discounts may be available to you depending on your location and insurance company. Common discounts include those for anti-theft devices, bundling policies, good driving records, being a good student, owning a green vehicle, low mileage, and multi-vehicle policies.

High-risk vehicle insurance

• Age and experience: Younger and less experienced drivers, particularly teenagers, are often considered high-risk due to their higher accident rates.
• Driving record: Multiple traffic violations, such as speeding tickets, driving under the influence (DUI), or at-fault accidents, can result in a high-risk classification.
• Lapse in insurance coverage: If you let your car insurance lapse by cancelling your policy or not paying your bill, your rates may increase when you reapply.
• Credit score: Individuals with poor credit history may be considered high-risk, as insurers associate poor credit with risky driving behaviour.
• Vehicle type: Driving a sports car or a vehicle with poor safety features can also lead to higher insurance rates.

If you are considered a high-risk driver, there are ways to mitigate the situation and potentially lower your insurance costs:

• Compare quotes from multiple insurers: Get free online quotes from different insurance providers and compare rates to find the most suitable coverage for your situation.
• Improve your driving record: Avoid speeding tickets and accidents, and consider taking a defensive driving course to demonstrate safe driving practices.
• Trade in your vehicle: Opting for a model with better safety features or a stronger safety record may result in lower insurance rates.
• Maintain a good credit score: Improve your credit history by making timely payments, minimising debt, and keeping your credit card balances low.
• Utilise discounts: Take advantage of discounts offered by insurance companies, such as those for safety features, educational achievements, or bundling multiple policies.

High-risk insurance is typically more expensive, but it is possible to find affordable options by shopping around and taking proactive steps to reduce your risk profile.

Electric vehicle insurance

Electric vehicles (EVs) are generally more expensive to insure than cars with gas engines, with insurance costing around 20% more on average. This is mostly due to EVs being more costly to buy and repair. For instance, replacement parts for EVs are 2.7% pricier than those for small cars with internal combustion engines (ICEs). EVs also tend to have higher battery replacement costs.

However, insurance rates for EVs have decreased significantly over the past few years, especially for established carmakers. In fact, for some models, such as the Ford F-150 Lightning, it can be cheaper to insure an EV than a gas car.

When it comes to insurance for EVs, it's worth noting that rates vary depending on the brand of the car. Electric vehicles sold by companies that also sell gas cars, like Ford and Volkswagen, are cheaper to insure. On the other hand, rates for EVs made by companies specialising in electric cars, like Tesla and Rivian, are significantly higher. For instance, the cheapest EV to insure is the Volkswagen ID.4, while the priciest is the Tesla Model X.

Tesla operates its own insurance programme, Tesla Insurance, which is often much more affordable than other insurance companies for insuring a Tesla. However, unless you live in California, you must use your Tesla's built-in telematics system, Tesla Safety Score, to get coverage. This has a significant impact on your rates, and one instance of hard braking or driving late at night could cause them to rise.

KOBA, an Australian insurance company, offers EV insurance specifically for Teslas. Their insurance is tech-based, requiring customers to sync their Tesla to their app. KOBA's insurance includes EV-certified repairers, charging equipment cover, a stolen car locator, and discounts for lower kilometres.

Managing a rate increase

As mentioned previously, car insurance rates are generally determined by assessing the amount of risk being insured by the policy. Risk is calculated by using the probability of a particular event occurring and the potential impact of that event. Probability is influenced by factors such as your age, location, and driving behaviour, while impact refers to the severity of the event if it occurs, including property damage, personal injuries, and financial loss.

• Review your policy: Understand your coverage types, limits, discounts, and premium. Look for effective dates and check if your next renewal is available. This will help you anticipate any changes in your rate.
• Shop for a new carrier: Compare rates and coverage options from different insurance companies. Each company has its own underwriting rules, discounts, rating algorithms, and policy features. You may find a lower rate that better fits your needs.
• Take advantage of discounts: Review your current discounts and identify areas where you could save. When shopping for new coverage, look for companies that offer multiple discounts relevant to your situation.
• Bundle your policies: Consider bundling your auto insurance with other policies such as home or renters insurance. Bundling can often result in significant savings on your overall insurance costs.
• Maintain a good driving record: Safe driving habits can help lower your rates. Avoiding speeding tickets, moving violations, and accidents will reduce your risk profile and may lead to lower premiums.
• Practice safe driving habits: This is especially important for young drivers. Programs like the Steer Clear® app offer educational resources and can help earn savings on auto insurance for drivers under 25.
• Maintain good credit: Keeping your credit score healthy can positively impact your insurance rates. Insurance companies may view a higher credit score as an indicator of financial responsibility and lower risk.
• Adjust your policy coverages, limits, or deductibles: Opting for a higher deductible can reduce your rates, but keep in mind that you'll pay more out-of-pocket in the event of a claim.
• Drop unnecessary coverages: If you have an older vehicle, consider opting out of comprehensive coverage, collision coverage, roadside assistance, or rental reimbursement. Evaluate your specific needs and adjust your coverage accordingly.

Remember, insurance premiums are not raised arbitrarily. Any increases are typically tied to insurance risk, and understanding these factors can help you manage your rates more effectively.

Frequently asked questions