Car Insurance Premium Rate Factors
Here’s everything you could need or want to know about the many factors that affect car insurance rates.
Companies consider many things when setting auto insurance rates, including your age, gender, where you live and what kind of car you drive.
So although what you pay for car insurance can seem random, it’s not.
In this article, you’ll learn about the many different factors insurers look at to determine your premium.
We’ve divided them into the following categories:
- Demographic factors that are used to calculate car insurance rates
- Your vehicle and how it influences the cost of a policy
- Driving history and habits and how they impact your premium
- Insurance choices that affect your rates
Demographic factors that influence auto insurance rates
Your age, gender, occupation and even marital status could all impact what you pay for car insurance coverage, as could a few other demographic factors.
Age is one of the main factors insurance companies consider when pricing an auto insurance policy. Why? Because age and risk go hand in hand when it comes to driving.
As a result, teens and senior citizens often pay more for car insurance than drivers between the ages of 25 and 65 do. In fact, our own study found that teenagers pay $438 a month for an individual policy, on average. That’s about $300 more than their parents typically pay for similar coverage.
Insurers don’t charge men and women over the age of 65 quite that much, but they still charge them more than most younger drivers.
Auto insurance providers also look at a driver’s gender when calculating their premiums.
This is because data suggests women are safer drivers than men. They get into fewer accidents, they cause fewer fatal crashes and they’re less likely to be arrested for driving under the influence.
Long story short, insurers often charge women less for car insurance than they do men.
Your job can influence how much you pay for car insurance, too.
Some insurers see certain occupations as especially risky. For example, statistics show that doctors and lawyers get into more accidents than people in other professions. Companies charge them more for car insurance as a result.
On the other hand, insurance companies might view artists, teachers and scientists as being less risky and so charge them less for auto coverage.
Where you live is another factor that affects car insurance rates.
Insurance providers include your address—your ZIP code, specifically—in their rate calculations for a few reasons, including:
- Some areas are more prone than others to vehicular crime like vandalism or theft.
- Some areas have more traffic congestion than other areas, which raises your crash risk.
- Some areas have more people driving without liability coverage, increasing the costs for insurers across the board.
- Some areas simply have a high number of lousy drivers.
Marital status can have a big impact on what you pay for auto insurance coverage. Specifically, you’ll probably pay less for a policy if you’re married than you would if you were single.
Why do car insurance companies charge single people more than they charge married couples? Because single drivers tend to be involved in more accidents than their married counterparts.
Insurance companies also consider credit scores and histories when pricing auto policies. They do this because they think people with bad credit scores are more likely to get into car accidents than people with good credit scores.
They can’t use that information against you everywhere, though. California, Hawaii, Massachusetts and Michigan no longer let insurers use credit history to determine premiums.
If you live in another state, your credit score may or may not affect your insurance rates. Some carriers outside of California, Hawaii and Massachusetts look at them and some don’t.
Some companies will charge you less for car insurance if you own a home. This can be true even if you didn’t buy your homeowners coverage from them.
Your vehicle and how it’s used to calculate your car insurance premium
The vehicle you own and drive plays a role in determining the cost of your car insurance, too. Here are the main factors companies consider in this area.
Vehicle age, type and value
You may have heard that insurance providers look at your car’s make and model while calculating your auto premiums. That’s true, but it’s only part of the story.
The age of your car, its value, how much it costs to repair and even its engine size affect insurance rates as well.
To be more specific, cars that aren’t worth much cost less to insure than ones that are worth a lot. Cars that are easy and cheap to repair cost less to insure than ones that require pricey or hard-to-find parts. And cars with large engines cost more to insure than those with smaller ones.
Safety features and rating
Your vehicle’s safety rating and features are additional factors that influence the cost of your car insurance coverage.
That said, not all safety features lead to cheaper auto premiums. If your car includes safety equipment or technology that’s expensive to repair or replace, you might pay a higher rate to insure it.
A high safety rating, however, pretty much always results in a lower car insurance rate. And if your vehicle has a low safety rating, it’ll usually increase your rate.
Likelihood of your car being stolen
Another factor insurance companies pay close attention to when coming up with a policy rate is how likely a vehicle is to be stolen.
Why? A stolen vehicle often means a big payout for an insurer.
Given that, it shouldn’t be surprising to hear you’ll pay more for car insurance if you have one of the most-stolen cars in America or live in a city with a lot of car theft.
Whether you own or lease your vehicle
Insurance companies don’t charge you a higher rate for auto coverage because you lease rather than own a car.
Still, you might pay more to insure a leased car than you would to insure one you own. Why? Because the leasing company may make you get more or different coverage, like gap insurance, than you’d get otherwise.
Driving history and habits and how they affect the cost of a policy
Along with factors like your age, gender and the kind of vehicle you drive, companies also consider your driving habits and record when setting your car insurance rates.
Driving record and habits
Car insurance providers will penalize you for having a lot of tickets or accidents on your driving record by charging you a higher premium. And they’ll raise your rates even more if you’ve been charged with just one DUI.
For example, auto insurers are known to increase a person’s premiums by 20% or more if they have accidents on their record. And our own research found that drivers with a single DUI charge pay $830 more per year for car insurance than they would without it.
Your driving habits also affect what you pay for car insurance. If you drive a lot, for instance, insurers will charge you higher rates due to your higher risk of getting into an accident. If your annual mileage is low, though, they’ll offer you cheaper rates.
Years of driving experience
Another factor insurance companies penalize people for—in the form of higher rates—is a lack of driving experience.
In particular, they’ll charge you more for car insurance if you barely have any experience behind the wheel. The reason for this is simple: You’re more likely to get into an accident or do something else that’ll cause you to file a claim.
The good news here is your rates will go down as you continue to add years to your driving record.
You should expect to pay a higher rate for car insurance if you have a history of filing claims. The same is true if you have a history of other drivers filing claims against you.
You may even need to buy high-risk insurance if you file too many claims in a short period of time.
Insurance choices that determine your rates
Many of the decisions you make about where to buy car insurance and the specific policy you buy also have an impact on the rate you pay for it.
Your choice of car insurance provider
The rate one company quotes you for a car insurance policy is sure to differ from the rate another company quotes you. And this is true regardless of your age, the kind of car you drive, where you live or any of the other factors discussed here.
That's because no two insurers will calculate your risk profile in the same way. Some think factors like location or occupation are most important. Others emphasize factors like age, credit score or vehicle type.
Coverage and deductible choices
The more car insurance coverage you buy, the more you’ll pay for it. So, if you get a full-coverage policy, your monthly premiums will be higher than they would be if you got just liability coverage.
For example, our research found that a typical male driver pays an average of $129.74 per month for full coverage. That same driver pays only $73.82 per month for liability coverage.
The deductibles you choose for coverage options have the opposite effect on the cost of your policy. In other words, if you go for a higher deductible, your premium will be lower. And if you go for a lower deductible, your premium will be higher.
One of the best ways to lower your car insurance rate is to look into and ask for discounts. Every insurer offers a number of them these days, and they cover a range of situations.
Some save you money for maintaining a safe driving record. Some reward you—or your child—for being a good student. And some reduce your premium for completing a defensive driving course.
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