Is it true that people with less education may pay higher car
Yes. As controversial as it may be, the education level of
drivers can be taken into account by auto insurance companies (if
your state laws permit, and most do), and thus could result in
someone with a high school diploma paying more for car insurance
than a person with a college degree.
As the advocacy group
Consumer Federation of America
points out, there are many non-driving behaviors that auto
insurance companies look into when calculating motorists'
premiums. (See "
Drivers to insurers: Watch our driving, not our
Such rating factors can include:
Why? Because insurance companies look into where the risk
is and rates drivers accordingly. Studies and actuaries have
determined that certain behaviors or risk factors are predictive of
who is likely to have more accidents -- and thus claims that auto
insurance companies have to pay out.
For instance, it's been proved that teenage drivers are much
more likely to be in car accidents than older, more mature
Also, the Federal Trade Commission (FTC) studied credit-based
insurance scores and car insurance and found that credit
information was indeed an effective predictor of claims that
consumers will file. Thus, in states that allow this as a
rating factor, car insurance companies can use your credit score to
predict your future claims, and thus use it in their calculation of
your final premium. (See "The double-whammy of bad credit")
State laws try to protect consumers by not allowing
discrimination based on factors such as age, color, sex, marital
status, occupation (typically tied to your education level), but
this is normally in regards to acceptance decisions (refusal to
write, non-renewal or cancellation of a policy), not in the rating
system itself to determine your premium amount.
Insurance companies are expected to show clear actuarial
justification for rating differences they use based upon
non-driving factors, such as education.
For example, New Jersey's Department of Insurance did a
comprehensive study into the use of occupation and education
factors in auto insurance. As part of the report, car
insurance companies' detailed loss data revealed that different
occupation and education levels had different degrees of loss, thus
making use of these factors valid.
If you don't have a college degree, don't get discouraged. Just
because education can be used doesn't mean it will, or that it
makes that big of a difference.
State laws vary on how rates can be set, and auto insurance
companies themselves weigh different factors differently.
While education may be important to one, it may mean very little to
Items that are actually driving related are some of the most
important data auto insurers look at. These factors
- Vehicle type and use
- Miles driven annually
- Driving record
- Claims history
- Years of driving experience
Non-driving and driving rating factors together, plus the type
of coverage and limits you want on your policy, help determine your
car insurance base rates. And some items that are
non-driving, such as occupation, may not be factored into the base
rate, but used instead to determine potential discounts.
Look here at six jobs that can get motorists car insurance
discounts because they've been found to file fewer claims (some
don't require a college degree). And your job doesn't
have to be of high-status, we've even seen discounts for beer
If you feel like your lack of education is raising your auto
insurance rates, the best thing to do is shop around.
Insurance companies rating system vary immensely. By comparison
shopping with several auto insurance providers you'll be able to
find the best possible rates for whatever your station is in