How Much of a Risk Are You?

Written by Donegal Marketing

January 8, 2021

How Lifestyle Choices Add Up to Insurance Costs

Have you ever wondered: How much of an insurance risk are you? And, how does that factor into your premium cost? How can one carrier’s price so vastly differ from another? The answer is a simple one: Insurance companies look at your lifestyle choices. 

Just as you study various companies to determine the best coverage, insurance carriers calculate your premium rate by considering different factors in your life. Finding the right insurance can seem like a challenge, leading many to opt for convenience and pick the first insurance company that they quote. In matching your lifestyle with what your insurance company is willing to offer, however, it’s crucial to research multiple carriers to find the right amount of coverage for you at the right price. One size never fits all- and you shouldn’t let an insurance company tell you otherwise.

Miniature real estate house with for rent label
Insurance Scores

Often, insurance companies determine your home and auto premiums by looking at an insurance score, determined through a combination of a consumer’s credit score, payment history, outstanding debt, credit history length, and the pursuit of new credit. These scores aid insurance companies in predicting how often an individual will file a claim and pay their deductible. Studies have shown that people with higher credit scores tend to file fewer accident claims. By contrast, their counterparts have a higher likelihood that a claim will be reported. The reason for these findings? Consumers with better credit scores are more likely to have a higher discretionary income that allows them to pay out of pocket for incidences to avoid filing a claim that may only go toward their deductible anyway.

Worried about your insurance score? There are many ways to improve yours, including: 

  • Paying your bills on time 
  • Reducing your debt 
  • And, limiting the number of insurance claims filed over a small amount of time 

Insurance companies can’t deny you because of a low credit score. If you have a credit score of 700 and above though, the carrier may be inclined to offer you a discount. Insurance scores are just a snapshot of time and can fluctuate. If you’re willing to make some slight changes towards improving your score, you’ll have a better chance of getting a reasonable rate on your home and auto insurance. 

Homeowners Insurance

Homeowners insurance is designed to bring your home and possessions back to the same condition they were in before a loss occurred, and to protect you against any accident that might occur on your property. It’s not designed to improve parts of your home or renovate an entire space. Among the questions insurance companies will consider:

  • Where is the home located?
  • What is the neighborhood crime rate?
  • Is the house near a fire department?
  • What is the condition, materials, and age of the home?

These standard questions are used to determine parts of your premium may be out of your control. Good lifestyle choices, however, like staying on top of preventative maintenance, can lead to lower premiums. By fixing small issues before they become big ones, you’ll save money. On the other hand, frequent claims translate to higher rates. 

Car Insurance

When shopping for car insurance, it may be tempting to reduce your rate by choosing lower coverage and a higher deductible because you assume you are a safe driver. Common sense tells us, however, that insurance exists for the sole purpose of “just in case” one has an accident, regardless of who is at fault. Like homeowners insurance, it’s essential to find the proper coverage for you. Insurance companies look at your age, marital status, location of the vehicle, type of vehicle and credit score when determining your premium. Preventative measures you can incorporate into your life to make your premium cheaper include:  

  • Bundling your home and auto insurance together, saving you an estimated 10-20% on premiums
  • Practicing safe driving, avoiding tickets and accidents 
  • Having young drivers take a driver training course, and maintaining good grades
  • Researching the type of car you are buying and future maintenance costs

While you can reduce your premium by choosing a higher deductible, know that you’ll incur higher out of pocket costs in the event of an incident. Prepare for this by setting aside money in a “just in case” fund, to not bankrupt you to pay your deductible. Higher deductible coverage will save 10-15% on your insurance annually. By doing your research, making smart vehicle choices and obeying traffic laws, you can make a positive impact on how much you pay for insurance. Determining the proper coverage for your lifestyle needs can be tricky and time-consuming; however, getting the insurance that best suits your needs is necessary and will save you money in the long term.


Written by Isabella Malave during her summer internship at Donegal Insurance Group


The above information is not based on Donegal Insurance Group’s rating standards.


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