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You are required to have auto insurance before registering a new car. The monthly payments to the insurance companies, called insurance premiums, can be a significant part of your expenses. These insurance premiums vary from person to person and young people in particular, can have high insurance payments. Why is that? What are the factors that affect those monthly payments?

In the interactive below, car owners describe themselves, their cars and their insurance payments. Make notes about:

  • the factors you think affect their insurance rate
  • how much they pay for insurance
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Types of Auto Insurance

There are several different types of auto insurance. Some are required by law and others are optional. Look at the table below for a summary of the different types of car insurance. Cursor over the icons to learn more.

Type of Insurance Required by Law? What it Covers Who is at Fault?
Liability Yes You are partially or fully at fault for the accident.
Accident Benefits Yes Any insured driver is responsible for the accident (including you).
Uninsured/Underinsured
Driver Protection		 Yes An unknown driver (hit and run) or an uninsured driver.
Direct Compensation Yes You are partially at-fault, or another insured driver is fully at-fault.
Comprehensive Coverage No Your vehicle is vandalized, stolen or damaged in a non-collision event (flood, fire, storm, etc...)
Collision Cover No You are fully at-fault for the accident.
Transportation
Replacement Coverage		 No Any
Depreciation Cover No Any

Factors Affecting Insurance Cost

The following two screens show a form used to get an insurance quote. The answers to these questions must affect the the insurance rates in some way. Use this graphic organizer to list 6-8 factors from the form. Explain why you think that factor affects insurance rates and give examples of answers that would increase and decrease monthly payments.

This is an image of an online insurance form with fields for vehicle type, distance driven to work, distance driven annually, four winter tires, coverage type, city of residence, date of birth, gender and driving history.

After completing your graphic organizer, click on the factors in the interactive below and watch a video of an insurance agent explaining why each question is asked and how the answer affects your insurance payments.

Did any of these factors surprise you? You may already have auto insurance. If you do, does your rate make sense given what you've learned?

If you don't have auto insurance yet, do you think your insurance rates would be high or low?

What Can I do to Reduce my Insurance Costs?

Now that you know what factors go in to calculating insurance premiums, can you think of strategies you could use to reduce your payments? Below are some resources you can use to start researching this topic.

Summarize what you've learned about factors affecting insurance premiums.

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