9 Factors That Affect Car Insurance Rates
Auto insurers consider several factors when deciding what premium you'll pay.
Shutterstock
Article QuickTakes:
A common goal among many drivers is lowering their insurance costs, but those costs can vary between individuals for a number of reasons. Several factors that affect car insurance rates are within your control, while others aren't.
Here's a look at nine data points auto insurers consider when setting your premiums, as well as guidance around how to pay less for the coverage you want.
1. Age
Teen drivers pay some of the highest auto insurance rates. With little to no experience, they file claims more often and cost insurers more money. Rates tend to drop significantly by age 20, then again by age 25.
Drivers in their 40s, 50s, and 60s are considered to be in the sweet spot, paying the lowest car insurance rates by age because of their maturity and experience. Older drivers in their 70s and 80s may see their rates go up because the normal effects of aging can diminish driving skills and increase accident rates.
2. Location
States have different requirements for the minimum liability coverage drivers must carry. Higher requirements are one factor that can increase the average premium in that state.
In 2019, car insurance premiums were highest in Louisiana, Michigan, and New York and lowest in Maine, North Dakota, and Iowa.
Your ZIP code can also affect your rate. If you live in an area where vehicle theft and accidents are more common, you may pay higher premiums. Some areas also experience weather-damage claims more frequently than others and therefore command higher rates.
3. Driving History
Your driving history influences how much you pay for car insurance. A single speeding ticket or at-fault accident may increase your premium for a few years.
However, the details of the accident matter, and some insurers won't increase your rate unless you get a second speeding ticket within a certain timeframe. Check with your Department of Motor Vehicles (DMV) to see how long different incidents stay on your driving record in your state.
In some states, filing a claim for an accident you didn't cause could also increase your rates. Insurance companies have found that some drivers end up in no-fault accidents more often than others and are riskier to insure.
4. Credit Score
Having excellent credit can help you pay lower premiums (and qualify for a lower interest rate when you need an auto loan). In most states, auto insurance companies can use an insurance score—based on your credit score and insurance rate—as a factor in deciding your premiums.
5. Vehicle Make, Model, and Year
Older vehicles that depreciated considerably are less valuable than newer vehicles, which also have new technology that can be pricey to fix.
More upscale cars also cost more to insure. For example, a BMW 5-Series had an average annual premium of around $2,190, while a Toyota Camry came in at about $1,720.
Vehicle size class matters, too; the average annual premiums for full coverage on compact SUVs will likely be different from the average for sedans.
6. Annual Mileage
Driving fewer miles can give you fewer opportunities to have an accident. You'll likely pay lower premiums as a result, especially if you work from home or have a short commute.
If you drive fewer than 5,000 miles a year, you may be eligible for the lowest rates your insurer offers. If you drive more than 12,000 miles annually, you may pay more. Thresholds can vary by insurer.
7. Insurance Company
Each insurance company has its own formula for the factors that affect car insurance rates. There's no one insurance company that's cheapest across the board, but there's an insurance company that's less expensive than others based on your unique circumstances.
For example, one company might charge substantially higher or lower rates than another company if you live in a certain state, have poor credit, have been in an accident, or have a teen driver on your policy.
8. Coverage Options
Drivers in every state except Virginia and New Hampshire must carry a minimum amount of auto liability insurance. Carrying more liability coverage than the minimum, adding collision and comprehensive coverage, and increasing or decreasing your deductible will influence your premiums.
9. Bundling Abilities
Finally, if you have a renters or homeowners insurance policy, you may be able to save on premiums by getting both policies from the same insurer. You shouldn't assume bundling will save you money. However, it's wise to get quotes and find out.
Final Considerations
The next time you're shopping for auto insurance, remember that there are multiple factors that affect car insurance rates, and each insurer prices some risks more favorably than others. By shopping around and getting quotes for the same level of coverage from several companies, you'll learn which offers the best value for your budget.
