The Surprising Reason You May Be Charged More for Car Insurance

Your driving record isn’t as important as you think it is when determining how much you pay for auto insurance.

If you’re poor or moderate-income, you’re likely paying more for your car insurance than wealthy people.

That’s according to a new study from the Consumer Federation of America, which found that economic and socio-economic factors not directly related to driving safety — like level of education, occupation and marital status and homeownership — have a major influence on auto insurance premiums.

In general, Americans who are single, didn’t attend college, don’t own a home, and work at blue-collar jobs have less money, Robert Hunter, the CFA’s director of insurance, told reporters in a phone interview this week.

“The combined effect of insurers’ use of these factors can result in considerably higher prices for low- and moderate-income Americans, leaving many overburdened by unfairly high premiums and others unable to afford insurance at all,” the study says.

The Washington, D.C.-based CFA analyzed minimum liability car insurance premiums in 15 moderate-income cities across the United States for its study. It found that motorists in the “poorer” economic categories were paying roughly 59 percent more for car insurance than people in the “richer” economic categories.

Although the average difference in premiums amounts to about $681 a year, Hunter said there was one instance in which a poor individual was paying $5,000 more for coverage, according to Michigan Radio.

“The current situation for low-income drivers is intolerable,” Hunter said.

The Insurance Information Institute, which represents property and casualty insurance companies, said the report’s findings are misleading.

James Lynch, the chief actuary of the Institute, said factors like education level and homeownership status may be unrelated to driving, but they are commonly used because they are linked to risk.

“They are all very good predictors of whether or not a person is going to be in an accident,” Lynch said. “Are insurance companies supposed to ignore information that’s staring them in the face?”

Lynch also faulted the report’s small sample size of 280 drivers.

Check out “What a Speeding Ticket Does to Your Car Insurance Rates.”

Want to pay less for auto insurance? Check out our “10 Tips to Cut Car Insurance Costs.”

What do you think of the report findings? Share your comments below or on our Facebook page.

Stacy Johnson

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