What factors contribute to your car insurance rate?

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

In a Nutshell

Many factors that go into setting your car insurance rate are within your control, but a couple of them are out of reach.

Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors' opinions. Our marketing partners don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when it’s posted.
Advertiser Disclosure

We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

Behind-the-wheel behavior — such as getting a traffic ticket or being involved in a crash — isn’t the only factor that affects your car insurance rates.

A host of other factors, including your credit history and your geographic location, can also dictate how much you pay for car insurance.

The Consumer Federation of America, a nonprofit advocacy group, says the availability and affordability of car insurance are vital for millions of Americans who rely on their vehicles for work and engaging in society.

What follows are nine factors that can help determine whether your car insurance premium is affordable or astronomical.

Paying too much for insurance?

Explore Other Options

Factors that contribute to your car insurance rate

  1. Your driving history
  2. Your vehicle
  3. Your coverage
  4. Your location
  5. Your credit history
  6. Your driving routine
  7. Your age
  8. Your gender
  9. Your marital status

1. Your driving history

The better your driving record, the lower your premium, says Loretta Worters, a spokeswoman for the Insurance Information Institute, an industry-backed nonprofit that helps consumers understand insurance issues.

“If you’ve had accidents or serious traffic violations, it’s likely you’ll pay more than if you have a clean driving record.

Aside from accidents and traffic tickets, reckless driving and driving while intoxicated can bump up your insurance premium, according to car insurer Liberty Mutual.

2. Your vehicle

The rate for insuring a luxury car like a Mercedes-Benz normally will be higher than the rate for an everyday 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.

Also, the driver of a high-octane car might feel the need for speed, Espenschied says.

Behind the wheel of a fast car, you’re probably more tempted to barrel down the road at 100 mph, he says, versus plodding along at 55 mph in the family minivan.

Speeding heightens the risk of crashing your car or being slapped with a traffic ticket, both of which can lift up your car insurance rate.

Another rate-setting variable is a car’s overall safety record, Worters says.

“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 a specific vehicle model has a higher chance of inflicting damage when in an accident, an insurer may charge more for liability insurance.”

Forty-nine states and the District of Columbia require liability coverage.

A car with top-notch safety features might qualify for an insurance discount, Worters says. These features include antilock brakes and dual air bags.

3. Your coverage

 Generally speaking, you’re required to buy a minimum amount of car insurance. Most auto loan lenders require you to have some car liability insurance, and car liability coverage is mandatory in every state except New Hampshire.

New Hampshire does, however, 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: The state requires a motorist to buy coverage or register an uninsured vehicle for a “significant fee,” according to the Insurance Information Institute.

But if you have a car loan, the lender might insist on even more coverage, such as comprehensive and collision.

As you’d expect, the more coverage you purchase, the higher your car insurance premium will be.

4. Your location

Where you park your car matters. In setting your rates, car insurers judge where your car is parked the majority of the time.

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

In setting car insurance rates, insurers drill down to the ZIP code level to look at neighborhood crime rates.

According to Worters, other location factors that can affect your car insurance rates include:

  • 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.

5. Your credit history

How you handle credit affects not only your ability to get a credit card or a mortgage, but it can also influence how much you spend on car insurance.

In nearly all states, car insurers can use what’s known as a credit-based insurance score when calculating the price of your coverage.

Among other things, insurers take into consideration your credit reports, payment history and credit utilization to come up with your credit-based insurance score, according to Liberty Mutual.

According to State Farm, a provider of car insurance, your credit history can help predict the likelihood that you’ll file an insurance claim.

Therefore, a not-so-great credit history can trigger a rise in your insurance rates because you’re viewed as a bigger financial risk.

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.

A regular credit score examines an array of factors to determine how likely you are to repay a loan or a line of credit, the National Association of Insurance Commissioners says.

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.

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

6. Your driving routine

Do you endure a lengthy commute to and from work each day? If so, you might pay more for car insurance than a motorist 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.

7. 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.

Adding a 16-year-old driver causes a car insurance premium to soar by an average of 152 percent, according to data cited by Allstate. Why? Teens are at a higher risk of crashing a car than drivers in any other age group.

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

8. Your gender

Worters says female drivers tend to get into fewer and less serious car crashes than men and get into less trouble with drunk driving than male drivers do.

“So all other things being equal, women often pay less for auto insurance than their male counterparts,” she says.

However, a 10-city study conducted in 2017 by the Consumer Federation of America found that “40- and 60-year-old women with perfect driving records were charged more than men for basic auto coverage nearly twice as often as men were charged the higher rate.”

Most of the time, however, car insurance premiums were lower for 20-year-old women than they were for 20-year-old men.

Several states either ban gender as a factor in setting car insurance rates or apply the same rating criteria to men and women.

9. Your marital status

Tying the knot can lead to lower car insurance rates.

A study conducted in 2015 by insurance marketplace InsuranceQuotes.com found that on average, a married 20-year-old paid 21 percent less than a single 20-year-old for the same coverage. Why the difference? Insurers believe married men and women are more responsible and mature than single people are.


Bottom line

Your behavior — such as your driving record, your driving routines and your credit history — can greatly affect your car insurance rates.

Therefore, it’s in the best interest of your bank account to properly manage those rate-setting factors that you can control.