Education And Employment: Auto Insurance Impact Factors

Auto insurance companies consider a variety of factors when determining insurance rates, including education level and employment status. While this practice may seem arbitrary, insurance companies argue that these factors can indicate a person's financial risk and likelihood of filing insurance claims.

Studies have shown that drivers with lower levels of education are more likely to engage in risky driving behavior and file more insurance claims. As a result, insurance companies often charge higher premiums to individuals with less education. Similarly, certain occupations are considered high-risk due to irregular work hours or increased time spent on the road, leading to higher insurance rates for individuals in these professions.

The use of education and employment status as factors in determining insurance rates has been controversial, with some arguing that it is unfair and discriminatory. There have been efforts to ban this practice in certain states, and consumers are encouraged to shop around for insurance companies that do not use these factors in their rating formulas.

Higher education levels are associated with lower insurance premiums

Several studies have shown that higher education levels are associated with lower insurance premiums. This is because drivers with higher levels of education are less likely to engage in risky driving behaviour and are less prone to accidents, traffic violations, and filing a high number of claims.

A study performed in Maryland and New Jersey revealed that more educated drivers tend to file fewer claims. While more educated people may not necessarily be better drivers, research indicates that those with a college degree or advanced degree are low-risk behind the wheel. They are less likely to drive under the influence, disobey traffic laws, be involved in a car accident, or drive uninsured. This group is also more likely to own a home and have multiple vehicles, which allows them to qualify for additional bundling and car insurance discounts.

On the other hand, auto insurance companies deem less educated people as high-risk clients. The likelihood of unsafe driving behaviour and more insurance claims lead to higher rates and insurance costs for these individuals.

The numbers prove that the more education you get, the less you’ll pay for car insurance premiums. For example, a study by Consumer Reports found that the average Geico quote for someone with an advanced degree was $700, while the average quote for an otherwise identical person without a high school diploma was $815.

Insurance companies argue that people with less education file more claims than those who attended college. However, consumer advocates claim that insurance companies are unfairly penalizing drivers of colour and working-class people, as well as adding another burden to a skewed economy that already makes things harder for marginalized groups.

Studies suggest that drivers with lower levels of education are more likely to engage in risky driving behaviour

Several studies have found a correlation between a person's level of education and their likelihood to engage in risky driving behaviour. These studies suggest that drivers with lower levels of education are more prone to risky driving behaviour, including accidents, traffic violations, and a higher number of filed claims. This results in higher insurance premiums for individuals with less education.

For example, a study from the New York Public Interest Research Group in 2014 found that insurance companies such as Geico and Progressive charged higher rates to non-professional workers and individuals with less education in New York State. Similarly, a 2021 study by Consumer Reports tracked the quotes provided by nine auto insurers to a hypothetical 30-year-old woman with a clean driving record. The study found that individuals with less education received higher quotes, with an average difference of $115 between those with an advanced degree and those without a high school diploma.

The correlation between education and driving behaviour has also been observed in the pricing of rental car insurance. Rental car insurance is typically set at a high standard rate, deemed suitable for all licensed drivers, regardless of their level of education. This suggests that education may not be a significant factor in driving ability or risk assessment for rental car companies.

However, it is important to note that the correlation between education and risky driving behaviour is not indicative of individual driving skills or abilities. The studies suggest a statistical trend, but each driver's skills and behaviours can vary regardless of their educational background.

Insurers consider occupation when setting rates

Insurers also take into account the stress level of your job, which affects driving habits. Teachers, engineers, scientists, nurses, and government employees are generally considered low-risk, stable policyholders. They are perceived to be detail-oriented and less likely to get into an accident. Conversely, doctors, athletes, and photographers tend to pay higher rates because they work in more chaotic environments.

In addition to occupation, insurers also consider education level when setting rates. Studies have shown that drivers with lower levels of education are more likely to engage in risky driving behaviour and are more prone to accidents, traffic violations, and filing a higher number of claims. As a result, they are often charged higher premiums. On the other hand, drivers with advanced degrees tend to keep a clean driving record and file fewer claims, resulting in lower insurance rates.

Unemployment status does not affect insurance rates, but unemployed drivers tend to pay more for their car insurance

Unemployment status does not directly affect insurance rates. However, unemployed drivers tend to pay more for their car insurance. This is because insurance companies consider unemployed individuals to be high-risk clients.

When insurance companies determine insurance rates, they consider the likelihood of unsafe driving behaviour and insurance claims. This results in higher rates and insurance costs for unemployed individuals. This is based on historical statistics that insurers have accumulated.

Unemployed individuals are often classified as pleasure drivers, which is the lowest-rated usage classification. This is because they do not drive during peak hours or in traffic jams. However, their unemployment status does not directly affect their insurance rates.

It is worth noting that insurance companies use various factors to calculate premiums, and unemployment status is just one of them. Other factors include age, driving record, gender, location, type of vehicle, and annual mileage.

Annual mileage impacts insurance rates

The number of miles you drive each year will affect the amount you pay for auto insurance coverage. The more miles you drive, the more likely you are to be involved in an accident, and the higher your insurance premium will be. This is because insurance companies calculate your potential risk when setting your rates.

Insurance companies use various methods to determine your annual mileage, including self-reporting, telematics devices, smartphone apps, and third-party sources such as auto repair shops. When you apply for insurance, you will be asked to estimate your annual mileage, and it's important to be as accurate as possible. Underestimating your mileage may result in higher premiums or even policy cancellation if the insurance company discovers the discrepancy.

Mileage Brackets and Discounts

Insurance companies often use mileage brackets, such as 0-7,500 miles, 7,501-10,000 miles, or 10,001-15,000 miles per year, to set their rates. The more miles you drive, the higher your premium will be. However, the specific thresholds and pricing tiers may vary depending on the company. Some insurance companies offer low-mileage discounts if you drive less than a certain number of miles per year, typically between 7,500 and 10,000 miles.

Pay-Per-Mile Insurance

Some insurance companies offer pay-per-mile insurance, where your premium is based on the number of miles you drive each month. This type of insurance is ideal for low-mileage drivers, as it can help reduce their insurance costs. With pay-per-mile insurance, you pay a base rate each month, plus a small fee for each mile you drive.

How to Calculate Your Annual Mileage

To estimate your annual mileage, you can multiply the number of miles you drive in a week by 52 to get an annual total. Alternatively, you can reset your odometer to zero and record your mileage for a week or a month to use as a guide. You can also refer to your vehicle's service history, which typically includes mileage information.

Frequently asked questions