- Auto insurance companies use your “insurance score” to determine your overall auto insurance quote.
- Your “insurance score” is determined by an insurance company using a proprietary formula and includes your occupation and salary history.
- Your job category and credit history speak volumes to insurance companies about your ability to act responsibly and pay your premiums.
- Changing jobs, being unemployed, or starting a new business can all affect your annual insurance premiums.
When you think about the cost of car insurance, you probably think about your driving record and whether you have had any speeding tickets or accidents — right?
You may not even know that car insurance quotes are based on a wide spectrum of personal details that help insurance companies determine if you are a good risk or not. In fact, you may be unaware that your job affects auto insurance rates.
It tells insurance companies so much about you — did you go to college? Do you have an advanced degree? Do you have the personality of someone who is meticulous and detail-oriented? Are you risk averse, or do you leap before looking? Your career choice is a blueprint of your life and helps insurance companies assess what type of a client you might be!
How Do Insurance Companies Determine Car Insurance Rates?
Every insurance company gathers information before they determine a quote for a customer on an auto insurance policy. Since they are in the business of making money by mitigating risk, insurance companies want to insure people that have a strong risk profile.
But what information are they looking at? Well, it turns out they are looking at just about everything, including:
- Your age – from 16 to 25 (the risk years), premiums tend to be higher, then level off through adulthood.
- Your gender – against popular belief, women actually pay more for car insurance in most states.
- Your marital status – married equals more settled and less risk tolerant, a good thing for insurance companies.
- What zip code you live in – is your neighborhood prone to theft or vandals, or do you live in “tornado alley” with extreme weather events?
- Own your home or rent – home ownership shows financial stability more so than renting.
- Your education level – the higher the degree, the more responsible and the higher your income potential.
- Your credit rating – your financial calling card that tells the world how you handle your finances and presumably your life.
- Your debt-to-income ratio – ditto.
- Your driving history – the cleaner the better.
- Your insurance history – insurance companies want to see zero claims filed.
- The average annual mileage you drive.
- The age, make, and model of your vehicle.
- And YOUR OCCUPATION and Annual Salary.
Some of this information is given by you voluntarily, but some of it is compiled by data aggregating or analytic companies like:
- FICO or VantageScore
- The three credit bureaus – Equifax, Experian, and TransUnion
- Automated Property Loss Underwriting System (A-PLUS) or the Comprehensive Loss Underwriting Exchange (CLUE) which catalogs auto claims, driving infractions, and accidents
- Motor Vehicle Departments within your state
Taken together, all this information determines your “insurance score”.
Exactly How is My Insurance Score Calculated?
Insurance companies look at your “insurance score” which is an overall glimpse of your risk profile. They take your demographic information, your driving record and history, and your credit file and, using their own proprietary formula, determine your “insurance score” which is then used to determine a quote for insurance premiums.
Since every insurance company uses a different formula and none of them release the formula or the results, you won’t know the exact number. However, a good indicator is your credit score and the higher your score the better your rates.
How Does Your Occupation Affect Car Insurance?
One thing we know for sure — when figuring your auto insurance score and quote, your occupation or job has a big impact on your overall auto insurance premiums. Auto insurance companies believe that your income and creditworthiness directly reflect on your risk profile, so your job affects car insurance rates.
As an example, if you are a DJ, you may be driving at night when there are lots of party goers on the road. This increases your risk in the eyes of insurance companies. On the other hand, if you are an accountant, there is a better chance that you are cautious in your driving and your personal life — and a better risk.
While this makes sense from a business perspective, it creates an upside down predicament for many people seeking a fair auto insurance premium. In fact, the higher your education the more money you probably make and the lower your insurance premiums will be. Conversely, those less educated and underemployed or in low-income jobs will pay much more for their auto insurance.
Is That Fair to Lower-Income Individuals?
According to the Consumer Federation of America (CFA), the answer is “No”! Auto insurance companies are using occupation and education more frequently and to a greater degree than factors such as accidents or mileage to determine rates. The CFA is calling on state legislatures and insurance commissions to end what they see as unfair practices that deliberately penalize low-income consumers.
Since most states require auto insurance for all drivers, it makes sense that the state insurance commissions look into how auto quotes are determined and to legislate for fair treatment of the most vulnerable members of our society.
What Job Titles Rate the Most Expensive Car Insurance?
So, what are the jobs that have the most expensive auto insurance? Interestingly, they are jobs that don’t require advanced education. People that work in these jobs are typically paid an hourly wage or a wage, plus tips. While they earn less than more skilled positions, they are paying significantly more for their auto insurance.
According to Motoring Research, these are the top five jobs for expensive car insurance:
- Fitness Instructor
What are the Cheapest Job Titles for Car Insurance?
In terms of the jobs that insurance companies find the most risk averse, these professions all require advanced education and command a much higher salary than the five jobs mentioned above. These jobs include a variety of traits that are appealing to those assessing risk, including:
- Financial Analyst or Accountant — meticulous and detail-oriented, they tend to work near or at home.
- Actuaries — the profession responsible for deciding how many claims can be expected and how much should be paid.
- Architects — with their precise, meticulous nature, they also tend to work close to home and demonstrate safe driving habits.
- Auto Mechanic — mechanics are seen as less likely to file a claim rather than just go ahead and fix it themselves.
- Clergy — safe by nature and less likely to drink or speed, clergy are seen as great risks for insurance companies.
- Doctors and Dentists — highly educated and risk-averse, healthcare workers in general are seen as favorable.
- Engineers — like architects, are precise and measured and typically have less auto related claims.
- First Responders and Law Enforcement — naturally cautious, these individuals tend to be very specific about their driving habits.
- Nurses and Social Workers — working in a female dominated profession, women tend to drive slower and more cautiously than men.
- Pilots — have a keen understanding of the safety of others.
- Retired people — perceived to stay home more and drive less while also being more cautious when they do drive.
- Underwriters — habitually cautious and risk averse.
Can Changing Jobs Affect Car Insurance?
Yes, changing your job can affect the amount you pay for auto insurance premiums and it’s important to notify your insurance company when making a job switch. Also, if the driving requirements for your current job significantly change that also should be reported.
A good example was during the COVID-19 pandemic when many people began working from home and limiting their outdoor contact dropping their miles to almost zero (which should have been reported to their insurance company). Similarly, as people begin to return to the office, that too should be a reason to notify your insurance carrier.
While a new job in the same category probably won’t change your insurance premiums, it may impact the number of miles you drive or the use of your car. And if your job change moves you to an entirely new job title category, this can also impact what you pay per month or year.
It should also be mentioned that being unemployed or starting a new business can also affect your annual insurance premiums.
Additional Ways to Improve Your “Insurance Score” and Lower Your Premiums
You may have committed to your career and don’t envision a move to a new industry. There are still ways that you can reduce your monthly auto insurance premiums by making changes that impact your “insurance score” in a positive way.
- Be sure to report any changes to your salary, such as annual increases, one-time bonuses, or changes in commission structures. Remember, income affects car insurance rates and the more you make, the less you may pay. An increase in income may positively impact your “insurance score”.
- Improve your credit score. Your credit history and score are a big part of your overall “insurance score”. A good credit score (above 700) demonstrates your ability to manage your finances in a solid way. Increasing your credit score may make the single biggest impact to the ability to get reduced insurance rates.
You can get access to your entire credit report for free from each of the three credit agencies once per year (or go to annualcreditreport.com). Once you obtain each of the three credit reports, then go over it with a fine-tooth comb. Challenge any discrepancies and see where you can make changes that will pump up your score.
- Another way to improve your auto insurance premium is to realign your debt-to-income ratio (DTI). To figure your debt-to-income ratio, just add up your monthly debt payments (e.g., mortgage or rent, student loans, insurance, credit card and loan payments) and divide by your gross monthly income.
Your goal should be to keep your DTI below 38%. If you’re not quite there, try paying off some of your credit card debt or student loans or consider a side gig to make a little extra bank.
- Be careful behind the wheel! Seems simple enough, but a single ticket or fender bender that you file a claim for lowers your ability to get low auto insurance.
To Sum Up
We’ve looked at how your job affects car insurance premiums and how “insurance scores” can impact what you pay. Today, it seems that more and more insurance companies are weighting jobs and income more heavily than your driving record or even your insurance history or past claims history.
The insurance industry is seen as a branch of the financial services sector and with that, they seem to be treating qualifying details the same as a mortgage lender or banker. Knowing that, it’s important that you keep a healthy credit history and credit score and be aware of your overall DTI. It will pay big dividends in auto insurance premium savings.
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