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What are the most important factors in determining car insurance costs in New Jersey?

Here's what you need to know...
If you live in New Jersey and you own a vehicle, you’re required by law to purchase at least a basic insurance policy to legally drive your car on all public roads.

If you don’t carry a valid policy at all times, you’re at risk of being fined or penalized in some other way. Because most drivers want to avoid penalties, understanding insurance laws and companies is crucial.

Every company has its own unique rates that have been approved by the New Jersey Division of Insurance.

Carriers may be regulated, but the marketplace is still a competitive one where insurers are free to charge each policyholder a unique rate.

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Continue reading this guide to discover what you need to know about how rates are determined.

Understanding How the Insurance Marketplace Works

AdobeStock_86818743-1600x1600Before you take a look at the important factors that are used to determine the cost of your policy, learning how the insurance marketplace works can be helpful.

The New Jersey Division of Insurance regulates the insurance industry in an effort to keep rates competitive while still keeping them fair for consumers.

Property and casualty carriers who sell insurance products must conduct a lot of research on projected claims and expenses before they can offer a gross rate.

Once the company has a gross rate, they are better able to use a client’s personal information to determine how risk (exposure units) will have an effect on the gross premium.

How much does auto insurance typically cost in New Jersey?

Because auto insurance in New Jersey is expensive, researching the state’s average cost of insurance before purchasing it may be helpful to your budget.

According to the latest reports, the average cost for a liability-only policy is $882 per year and the average cost for a full coverage policy is $1,254 per year.

You should not assume that your premium will fall somewhere around the state average. If, for example, you own a luxury vehicle, your rates could be dramatically different.

In addition, auto insurance companies charge policyholders who are most likely to file a claim the highest premiums.

Due to these factors, every person’s rate is different.

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Different Risk Classes for Standard Policies

Typically, insurance carriers use three different tiers when placing a driver in a risk class.

When you research auto insurance rates, differentiating one risk classification from the next can help you compare your auto insurance rates apples-to-apples.

Here’s a breakdown of the driver risk classifications:

  • Preferred risk – At this level, you pay the best rates because you have driving experience, a clean driving record, continuous coverage, and no at-fault accidents.
  • Standard Risk – In the standard risk class, you pay average rates because you have minor moving violations, one at-fault accident, and an average credit rating.
  • High Risk – As a high-risk driver, you pay the worst rates because you’re not experienced, you have serious violations, you have had multiple accidents, and you have a lapse in your insurance history

The Most Common Rating Factors

AdobeStock_75961762-1600x1600Carriers in New Jersey have their own individual rates, but they generally use the same risk factors when estimating your premium. Obviously, the higher the limits the more you will pay.

Here are some of the factors that may be beyond your control:

– Age and Gender

In the state of New Jersey, auto insurance companies are free to use your age and gender to place you in a risk class.

If you are a young driver with very little experience, you could automatically fall into the high-risk tier. Additionally, if you are a young male driver, insurance companies are more likely to deem you high risk.

– Insurance Score

Insurance companies in New Jersey can legally use your credit rating to calculate rates. While companies don’t look at all of the items on your credit report, they will use an insurance score.

This score includes information on your credit rating, claims history, and driving record. You can receive a score between 500 and 997.

– Driving Record

Besides having an impact on your insurance score, your driving record can also place you in a riskier class.

Many insurance companies offer good driver discounts to drivers who have clean records or one minor moving violation. If you have infractions, you could be surcharged for them and lose your discount.

– Claims History

Claims history is another category that can impact your rates in multiple ways. Not only can your claim history drive your insurance score down, but it can also affect your ability to find insurance if you have too many claims.

Generally, only at-fault accidents have an effect on premiums. Before you file a small claim, remember that accidents are surchargeable for up to three years.

– Geographic Location

Where you live can influence your premiums. You might assume that living in a small town would save you money, but that’s not always true.

Insurance companies use claims statistics and crime rates to set rates specific to a geographic area. For example, residents of Bloomsbury are likely to pay less than residents in Salem because the crime rate is much higher in Salem.

– Vehicle Use and Mileage

If you drive to and from work, you will pay more than the person who drives to run errands only. Your commute, your vehicle usage, and your annual mileage will all influence your rates.

Be sure you update these factors if you change jobs, lose your job, retire, or start working from home.

The best way to save money on your insurance is to review several different auto insurance quotes closely.

If you’re shopping for insurance and you don’t have time to call dozens of agents, use an online rate comparison tool.

Enter your personal information for instant car insurance quotes and find the best rates in the comfort of your own home or office.

Start comparing auto insurance rates now using the FREE online price comparison tool below!

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