Some Strange, Surprising Truths About Car Insurance

NEW YORK (TheStreet) — A 20-year-old married male pays 21% less on average for car insurance than a 20-year-old single male, but 22% more than what a 20-year-old married female spends for the same coverage.

But don't worry, he'll get a better rate than the married female does when they both turn 30 — until, of course, they reach 56, at which point she'll enjoy lower premiums again.

It's all part of the complicated way that auto insurers factor in age, gender and other data when calculating how much you have to pay for coverage.

"People are shocked when they find out how many variables go into car-insurance rates. Where you live, whether you're married — all of that impacts what they charge," says Laura Adams of InsuranceQuotes.com, which recently analyzed how different factors affect premiums.

Carriers have long used a wide variety of data beyond just driving record or claims history to set rates. Firms generally look at everything from age to credit score, unless you live in a state where insurance rules ban the use of a given factor.

The industry maintains that its statistical analysis accurately predicts how much you're likely to cost your carrier in claims — and therefore what your premiums should be.

"These underwriting criteria have been tested for almost a century now and have been demonstrated to [work]," says Robert Hartwig of the Insurance Information Institute, an industry trade group.

For instance, he says, male teenage drivers have far more accidents and higher claims than female ones, so charging guys higher rates means keeping prices lower for the ladies.

Still, InsuranceQuotes' study — which analyzed market tracker Quadrant Information Systems' database of typical rates that different kinds of consumers paid as of February — uncovered some surprising differences in average premiums based on demographics.

Some key findings:

  • Premiums drop nearly in half once you hit age 25. The typical 25-year-old driver pays a hefty 41% less than a 20-year-old of the same gender for identical coverage. After you turn 25, you rate slowly continues to drop every year for decades. It'll fall another 18% by the time you reach 60.
  • Once you're 60, your premiums will rise gradually again, but only by 17% by the time you're 75. And even with those increases, the average 75-year-old will still pay 43% less than what a 20-year-old forks over for identical coverage.
  • Married people usually enjoy lower premiums than singles, but the gap shrinks as you age. As noted, a married 20-year-old pays 21% less for coverage than a similar single. But the difference drops to 7% at age 25 and just 2% or so once you hit 30.
  • Women don't always pay lower rates than men. True, a 20-year-old male does face 22% higher premiums than a 20-year-old female for identical coverage, but the gap narrows to just 3% at age 25.
  • At age 30, single males actually pay 0.62% less on average for coverage than 30-year-old single females. Such discounts continue to age 56, at which point women begin getting the better rates again.
  • As noted, some states ban insurers from using certain criteria when setting rates. Hawaii has some of the strictest rules, prohibiting the use of age, gender or marital status. California bans the use of age, but not years of driving experience, while Massachusetts and North Carolina don't let carriers use gender when setting rates.

Adams says that while consumers can't do anything about their ages and won't change their marital status or gender (a la Caitlyn Jenner) just for insurance purposes, savvy shoppers will make sure they get the rates they're entitled to. For instance, she says newlyweds should tell carriers they're getting hitched so their premiums drop.

"If you get married this summer and wait to report that to your insurance company until your policy renews next year, you'll be missing out on savings that whole time," Adams says.

Methodology: InsuranceQuotes' study analyzed average premiums paid by consumers who drive 2012 sedans and have a job, a bachelor's degree, a clean driving record, excellent credit and no lapse in coverage. Researchers also assumed that all policies included $100,000 bodily injury per person, $300,000 bodily injury per accident, $100,000 property damage per accident, $10,000 personal-injury protection and a $500 deductible for comprehensive and collision.

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