10 factors that affect car insurance rates

Two friends riding in a car and wondering what factors determine their car insurance rates.Image: Two friends riding in a car and wondering what factors determine their car insurance rates.

In a Nutshell

Whether you already have a car insurance policy or are shopping for one, several factors could affect your ability to get a lower car insurance rate. Some of these factors that affect car insurance rates — such as your driving history and the types of insurance you choose — are within your control. But others, such as your age, aren’t. Shopping around for auto insurance and asking about discounts may help you find a lower rate.
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Behind-the-wheel behavior — such as getting a traffic ticket or being involved in a crash — is only one of the factors that affect car insurance rates.

A host of other factors can also dictate how much you pay for auto insurance. For example, your credit history — and even where you live — could prevent you from getting a lower car insurance rate.

Let’s take a look at 10 factors that can help determine whether your car insurance premium is affordable or astronomical, and ways you may be able to lower your rate.

  1. Your age
  2. Your driving history: Experience, claims and violations
  3. Your mileage
  4. Your vehicle: Make, model and safety features
  5. Your location
  6. Your credit
  7. Your gender
  8. Your marital status
  9. Your auto insurance coverage: Types, coverage limits and lapses
  10. Your auto insurance company: Rates and discounts

1. Your age

Younger drivers with little to no on-the-road experience normally pay a steeper price to get behind the wheel than their parents do. Why? Teens are at a higher risk of crashing a car than drivers in any other age group.

For 16- to 19-year-olds, the fatal-crash rate per mile driven is almost three times the rate for drivers age 20 or older, according to the Insurance Institute for Highway Safety’s analysis of 2018 data from the U.S. Department of Transportation.

Generally, a car insurer will charge a higher rate if any driver below age 25 is covered under a policy.

Similarly, rates go up for drivers after age 65 because of increased auto insurance claim rates and risk. The Insurance Institute for Highway Safety’s analysis found that older drivers, especially those age 75 and older, have higher crash death rates than drivers age 30 to 74.

2. Your driving history: Experience, claims and violations

In short, the cleaner your driving record, the better your insurance rate will be.

If you’ve had accidents or serious violations — such as a DUI or DWI conviction, too many tickets in a short time frame or driving without insurance — insurers will consider you a high-risk driver and charge you a higher premium. Likewise, if you’ve filed several insurance claims or had claims filed against you, your rate will typically be higher.

Newer drivers also typically pay higher rates than those with a longer history of safe driving.

3. Your mileage

Do you have a lengthy commute to and from work each day? If so, you might pay more for car insurance than someone who merely depends on a vehicle to run quick errands. That’s because more miles logged translates into more roadway risks, such as a car crash.

4. Your vehicle: Make, model and safety features

Your car’s make, model and safety features can all affect your insurance rate because of several factors.

Cost of the car and repairs

The rate for insuring a luxury car like a Mercedes-Benz will normally be higher than the rate for a more affordable car like a Honda. Why? A higher-priced car typically costs more to repair or replace than a cheaper model does, says John Espenschied, owner of Insurance Brokers Group.

Potential for injury or damage

Another rate-setting variable is a car make and model’s overall safety record, says Loretta Worters, a spokeswoman for the Insurance Information Institute, an industry-backed nonprofit that helps consumers understand insurance issues.

“Insurers not only look at how safe a particular vehicle is to drive and how well it protects occupants, but also how much potential damage it can inflict on another car,” she says.

If the model you drive is more likely to cause damage in an accident, your liability insurance premium may be higher. You can check a car’s safety rating on the Insurance Institute for Highway Safety’s website.

The good news is that if you have a car with safety features, such as antilock brakes, an anti-theft system or blind-spot indicators, you may be able to qualify for an auto insurance discount.

Likelihood of theft

Auto insurance companies may charge you more if your vehicle’s make is among those that are stolen the most. The National Insurance Crime Bureau reports on the top 10 most stolen vehicle makes each year. In 2019, full-size Ford pickups, the Honda Civic and full-size Chevrolet pickups were the top three types of vehicles targeted by thieves.

5. Your location

In setting car insurance rates, insurance companies drill down to the ZIP code where your car will be parked the majority of the time.

Because of generally higher rates of accidents, theft and vandalism, car owners who live in urban areas might pay higher auto insurance premiums than their small-town or rural counterparts do, Worters says.

Here are some other location factors that may affect your auto insurance rates.

  • How much auto insurance fraud occurs in your area
  • Which kinds of severe weather, such as hailstorms and ice storms, hit your region (and how often)
  • How much car repairs cost in your area

6. Your credit

How you handle credit affects your ability to get a credit card or a mortgage, but it can also influence how much you spend on car insurance.

Depending on state law, car insurers can use what’s known as a credit-based insurance score when calculating the price of your coverage.

Historical data suggests that your credit history can help predict the likelihood that you’ll file an insurance claim — Federal Trade Commission studies have revealed that those with less-than-perfect credit are more likely to file auto insurance claims than those with good credit.

A not-so-great credit history can trigger a rise in your insurance rates because companies view you as a bigger financial risk. Drivers with poor credit pay $1,546 more on average for car insurance than those with excellent credit, according to The Zebra’s 2020 The State of Auto Insurance report.

State laws in California, Hawaii, Michigan and Massachusetts prohibit this credit-based insurance scoring from being factored into car insurance rates.

Keep in mind that a credit-based insurance score isn’t the same as the credit scores that come into play when you apply for a car loan or credit card. Regular credit scores examine an array of factors to determine how likely you are to repay a loan or a line of credit.

Meanwhile, a credit-based insurance score looks at some, but not all, factors in your credit history to determine how likely you are to file an insurance claim. Among other things, insurers take into consideration your credit utilization, credit history, delinquencies and credit mix to come up with your credit-based insurance score.

7. Your gender

While men under 20 generally pay more for auto insurance than women of the same age range, the Consumer Federation of America found in 2017 that women between the ages of 40 and 60 often pay higher rates — anywhere from 1% to 16% more than men, depending on the insurance company.

In some states, including California, Massachusetts, Michigan, Montana, North Carolina and Pennsylvania, it’s against the law for rates to be based on gender.

8. Your marital status

Whether you’re single or married can also affect your insurance premium. Insurance companies have found that married drivers are less likely to file auto insurance claims than non-married drivers. As a result, married drivers may pay less for insurance coverage than single drivers.

But similar to insurance score and gender, some states — including Hawaii, Montana and Massachusetts — have outlawed marital status as a factor in determining someone’s insurance rate.

9. Your auto insurance coverage: Types, coverage limits and lapses

Several factors related to your auto insurance coverage can affect your rates.

Types of car insurance you buy

The more coverage you purchase, the higher your insurance costs will be. The types of coverage you need vary based on your state’s requirements and whether you own your vehicle outright or finance or lease it.

Liability insurance is mandatory in every state except New Hampshire. But New Hampshire does mandate that drivers prove they can provide a sufficient amount of money in case of an at-fault crash. The car insurance mandate has a slight twist in Virginia: Drivers are required to buy coverage or pay an uninsured motor vehicle fee to the state’s department of motor vehicles.

Some states may also require personal injury protection, or PIP, uninsured/underinsured motorist coverage or medical payments coverage.

Additionally, if you have a car loan or lease your vehicle, the lender may require you to buy comprehensive and collision coverage.

Coverage limits and deductibles

A coverage limit is the maximum amount your insurance company will reimburse you on a covered claim. The higher your coverage limit, the higher your premium will be.

Your deductible is the amount you’ll pay out of pocket on a covered claim before your insurance kicks in. A higher deductible will lower your premium, but you’ll need to come up with more cash if your car is damaged or stolen. Alternatively, a lower deductible means you’ll pay less money upfront, but your premium will be higher.

Coverage lapses

If you’ve let your auto insurance lapse in the past, you could be considered a high-risk driver, and your rate could be higher than someone who’s maintained consistent coverage.

10. Your auto insurance company: Rates and discounts

The auto insurance company you choose is a key factor in how much you pay for insurance. Rates vary by insurer, and some insurers offer a broader range of discounts than others.

Depending on the company, you may be able to find loyalty, multi-policy, multi-car paperless, good driver, good student, safety feature, military, homeowner and pay-in-full discounts, among others.

That’s why it’s so important to shop around and compare insurance quotes from multiple insurers to help make sure you’re getting the best policy for your needs and budget.

Next steps

Shopping around for car insurance is crucial — whether you’re shopping for auto insurance for the first time or looking for a new policy because you bought a new car, moved, changed your driving habits or experienced another change in circumstances. Be sure to ask insurance companies about any rate discounts they might offer. And if you’re a careful driver or don’t drive much, ask whether the insurer offers any usage-based insurance programs. Depending on the policy, this type of insurance bases your premium largely on either how safely you drive or your mileage, which could save you money.

Even if you already have an auto insurance policy you’re happy with, shopping around each year can help you assess whether you still have the best rate for yourself or can find a better rate elsewhere.

About the author: Rebecca Giantonio Moran is a managing editor at Credit Karma. She has more than 20 years of experience in brand development, content and website strategy, copywriting, marketing and public relations. Throughout her ca… Read more.