Does Education Affect Car Insurance Rates?

The education level of applicants is a minor factor that may affect auto insurance costs. Most insurers take educational qualifications into account, provided it is permitted by the state. Typically, drivers with a high school diploma may receive fractionally lower car insurance rates compared to high school dropouts. College graduates may experience slightly greater savings, although the overall impact on premiums may not be significant. However, the influence of holding a master’s or Ph.D. degree hardly goes beyond what a college degree already offers.

It is not that car insurers believe individuals with higher education are inherently better drivers; rather, they perceive them as more responsible and less likely to engage in risky behavior on the roads. These individuals are more inclined to follow traffic regulations and speed limits, leading to fewer accidents and insurance claims. Insurance companies base their decisions on the probability of incurring losses due to claims, without being discriminatory for other reasons.

Studies support the notion that individuals with higher degrees tend to be lower-risk drivers. For example, the New Jersey Department of Insurance conducted a study on the use of education and occupation in premium calculations, which found distinct differences in claim levels based on detailed loss data. As a result, they had no objections to the inclusion of such information.

However, states such as California, New York, Massachusetts, Georgia, Montana, and Hawaii do not permit the use of education as a factor in calculating vehicle insurance premiums. The remaining states have no objections to its consideration, although rules may change over time.

According to Freeway Insurance, approximately 60% of car insurance companies incorporate education as a factor to varying degrees in their premium calculations. Although this may change in time, companies like State Farm, Allstate, Travelers, NJM Insurance, and Plymouth Rock do not inquire about the applicant’s education level in their quote forms, confirmed by this study.

Nonetheless, several other studies suggest that education indirectly affects automobile insurance premiums because individuals with higher degrees are more likely to achieve greater success in their lives and hold more esteemed job positions. They are also more likely to own a home, possess better credit scores, and reside in lower-risk zip codes—all of which are significant factors in premium calculations. Some studies mistakenly conflate these indirect factors with education itself, leading to skewed results.

State and federal laws prohibit discrimination based on age, color, sex, occupation, and background to protect consumers, with the latter two directly relating to education. This means that insurers cannot refuse coverage, renewals, or cancel policies based on these details. However, in most states, insurers are allowed to differentiate car insurance rates using various factors such as age, gender, occupation, education, and credit history.

In recent times, insurance companies have been using numerous non-driving-related factors based on extensive studies of past claims and accident statistics. When a consistent correlation between claims and certain variables is identified, they may incorporate them into their premium calculation algorithms. Computer-driven calculations enable insurers to include a more extensive range of data in their quote programs.

As market competition intensifies, auto insurers must accurately assess risk. Being overpriced results in a loss of competitive advantage, while being too cheap leads to financial losses. Including additional variables in their calculations allows insurers to make more precise assessments. When certain individuals receive extra discounts, it does not mean that others will lose out; it simply means that those who do not meet the specific criteria cannot obtain those particular discounts.

If you are seeking ways to save money on auto insurance and are unsure which companies offer the best rates based on your qualifications, conducting thorough research may be necessary. Rather than fixating on a single discount or factor, motorists should obtain multiple quotes to determine which companies provide the best rates after considering all the details provided.