What Factors Affect Auto Insurance Rates?
When it comes to auto insurance, not all policies or providers carry the same rates. In fact, the amount you’ll pay each month is determined by a number of factors — from your annual mileage to your car make and model and even your personal demographics! Fortunately, when you understand what influences auto premium prices, you’ll know how to find the best insurance policy at an affordable rate.
Ready to find affordable car insurance rates that you can rely on? We’re here to help you do just that. Stay with us as we cover the top rating factors most often used by auto insurers—and how you can maximize your savings each month.
How Car Insurance Companies Decide Your Rate
While not all companies use the exact same guidelines, here’s a list of what commonly determines the bottom line on your auto insurance policy.
- Where You Live: There are a couple of ways that your location influences the amount you’ll pay for insurance: your state and your zip code. Each state has its own laws about car insurance, with different minimums and different categories of required coverage. You can learn about the coverage requirements in your state here. You may also be interested in learning about tips to help you save money on auto insurance premiums
Your zip code matters, too, because car insurance rates are also determined based on the factors associated with each area. For example, city drivers will often pay higher auto insurance rates than those in smaller towns or rural areas, since urban areas have higher rates of accidents, auto theft, and vandalism. Zip codes that are vulnerable to floods, earthquakes, and wildfires also result in higher rates for drivers.
- Age: It’s not just that young drivers have less experience. They’ve also been shown to drive more recklessly and get into more accidents than any other age group, which makes them some of the highest-risk drivers on the road. As a result, teen drivers pay some of the most expensive premiums. Insurance rates start to decrease once a driver turns 25, and they drop to an all-time low by age 50 for mature, experienced drivers. However, senior drivers are at a high risk of getting into an accident, which is why auto insurance rates begin to increase after age 65.
- Car Make and Model: The safer the car, the cheaper it is for a provider to insure. Car insurance companies look at a variety of factors, including how safe a particular car is to drive, how well it protects its passengers, and how much potential damage it can cause to another vehicle. That’s why cars with high safety ratings may qualify for premium discounts.
The cost of your car is also a major factor in determining how much you’ll pay for a premium. If your vehicle costs more to replace, the insurance company will charge you more each month to cover these potential costs (via collision and comprehensive coverage).
Finally, vehicles that are statistically more likely to be stolen— such as a Ford F-series pickup truck or Honda Accord — also raises your rates, since they pose a higher risk.
- Credit History: Most insurance companies use your credit score to predict the likelihood of you filing a claim, as well as the potential cost of that claim. As a result, they usually charge higher premiums to those with poor credit or no credit history. The exception to this is for drivers who live in Massachusetts, Hawaii, or California. These three states don’t allow auto insurance providers to use your credit score as a factor in deciding your premium. The good news is that if you have great credit, you may be eligible for a discount in all other 47 states.
- Your Driving Record: If you have a history of traffic violations and/or accidents, you’ll be considered a high-risk driver. As a result, you could see a premium increase of anywhere from 20% to 200% on your monthly statement. The specific amount that your rates increase will depend on the severity of your violation, how many claims you’ve made, and whether you’ve been convicted in the past. Most providers use traffic violations as a factor in car insurance pricing for only three years, while others may go back five years or more. If your provider falls into the latter camp, it may be in your best interest to shop around for a new provider three years after your most recent claim.
On the other hand, if you have a clean driving record, you could pay up to 40% less than high-risk drivers, thanks to safe-driver discounts.
- Annual Mileage: It’s simple math—the more often you drive your car, the greater the chance that you’ll be in an accident. As a result, auto insurance providers charge you more when you rack up a lot of miles each year. If you drive your car for work or commute long distances, you’ll pay a higher premium than occasional drivers.
- Marital Status: Statistically speaking, married drivers have 50% fewer accidents compared to other drivers, which makes them less risky to insure. Make sure to update your provider if you plan on getting married so that you can enjoy a decrease in your auto insurance rates.
- Gender: Studies show that women tend to get into fewer accidents and have a lower percentage of DUIs than men. That makes it surprising to learn that, on average, women pay around $750 for their six-month premium versus men, who typically pay $735 for the same time frame. However, age plays an important role here. Because men under the age of 25 tend to be the riskiest drivers on the road, they pay the most for car insurance, at nearly 15% more than their young female counterparts.
Tips For Lowering Your Car Insurance Rates
Ready for the good news? If you’re struggling to afford your coverage, there are plenty of ways to lower your coverage rate, including:
- Increase your policy deductible: A higher deductible means a lower premium, so you may want to talk to your insurer about raising yours. But be careful not to increase it too much. Your deductible is the amount you’ll need to pay out of pocket before your insurance kicks in, so it should never be more than you can actually afford.
- Reduce your mileage: Before you can get coverage, an insurer will want to know your annual mileage, and they’ll charge you more if you’re a frequent driver. If possible, consider carpooling, hopping on your bike, or using public transportation to significantly decrease your mileage—and therefore your premium.
- Check for discounts: Most insurers offer a wide variety of discounts based on your driving history, type of coverage, customer loyalty, and number of insured cars. They may also offer reduced rates for students, seniors, military and federal employees. Some may also partner with professional and academic organizations that provide their members or employees with additional discounts. There’s a discount for just about everyone, so make sure to ask your agent what’s available for you.
- Shop around for a new policy or provider: Because insurance companies charge different rates for the same coverage, comparing prices before choosing a provider is one of the best ways to lower your monthly premium. To really maximize your savings, you may even want to shop around every six months to a year, before your policy is about to renew.
See How Much You Can Save on Auto Insurance
We believe that everyone deserves the protection of a comprehensive auto insurance policy—and it shouldn’t be a drain on your wallet! That’s why we’re proud to offer some of the best coverage rates in the industry. Thanks to our fast and get free online insurance quotes, you can choose a plan and get your coverage in just minutes. Get your free quote today and
enjoy the peace of mind that you and your family are protected on the road.
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Frequently Asked Questions
Though there are multiple factors that will go into calculating your car insurance rates as discussed here. There are 3 major factors that you can bet will determine your overall auto insurance rates:
1. State law and what amount of auto coverage you’ll need legally.
2. Your car’s make and model.
3. Age of the drivers on the policy.
Michael Giusti is a senior insurance analyst, business journalist, and university professor with over 20 years of experience. He serves as department chair at Loyola University New Orleans and contributes to Insurance Thought Leadership, U.S. News, and other leading financial outlets.
