The Top 15 Factors that Determine Your Auto Insurance Rates
Last Updated on September 4, 2021
Insurance companies use dozens of factors to calculate insurance premiums. Some factors, however, play a bigger role than others.
Factors like your driving history, for example, tend to be more important than your credit score.
Today, we’re highlighting the top 15 factors that determine your insurance rates.
Fifteen Factors That Impact Your Premiums
Your driving record plays a crucial role in determining car insurance premiums. If you have multiple at-fault accidents on your driving record in the past seven years, then you’re going to pay higher insurance premiums than someone with a clean driving record. In most states, insurers can only check your driving record over the past five to seven years. Certain items, however, may remain on your item for 10 years. In California, for example, insurers can see DUI convictions dating back 10 years.
Statistics show that gender impacts accident rates. Young males are significantly more likely to cause a serious accident than young females. With age, these trends reverse: middle-aged and older males tend to be safer drivers than females. Young men will pay higher insurance premiums than women of the same age, but older men will pay lower insurance premiums.
Six states have banned the use of gender for calculating insurance premiums, including Hawaii, Massachusetts, Michigan, Montana, North Carolina, and Pennsylvania.
Your age plays a significant role in insurance premiums. Teenage drivers pay the highest insurance rates in the United States, while drivers in their 50s and 60s pay the lowest rates. As drivers get older – say, into their 80s and 90s – insurance rates start to rise once again. Statistics tell us that age impacts accident rates and young drivers are significantly more likely to cause an accident than older drivers.
Married couples are significantly less risky for insurers than single, divorced, or widowed drivers. Statistics tell us that married couples are less active than single drivers. Statistics also show that married couples tend to drive more safely. Because of these effects, getting married can lower insurance premiums by 5% to 15%. This discount is particularly strong if you get married at an early age (say, your early 20s). However, the discount is less significant for older, married couples.
The ZIP code where you live will impact insurance premiums. Certain ZIP codes are associated with higher accident rates than other ZIP codes. If you live in a crowded, urban area, for example, then your risk of getting into an accident is higher than if you lived in a remote, rural county. There are more drivers around you. Similarly, some ZIP codes are associated with high rates of crime, vandalism, or break-ins, which could raise insurance rates. For all of these reasons, your insurance company needs to know the ZIP code of the location where you park your car at night.
Vehicle Safety Rating
Certain vehicles are safer than others. They perform better in a crash. Vehicles with strong safety ratings lower costs for insurers. They reduce the chance of significant injuries, making it less likely that the insurer is required to pay hundreds of thousands of dollars in medical bills. Some vehicles are less likely to roll over than other vehicles, for example, while other vehicles have higher passenger survivability ratings than others. Insurers will consider your vehicle’s safety rating when calculating insurance premiums.
In an accident, larger vehicles do more damage than smaller vehicles. If you cause an accident in a larger vehicle, you could significantly injure or kill multiple people – and your insurer would be required to cover these costs. Larger vehicles are more likely to inflict significant damage to other people and property in an accident. That’s why insurers will consider your vehicle size when calculating insurance premiums.
Age of the Vehicle
Older vehicles tend to be less valuable than newer vehicles. In an accident, an older vehicle is more likely to be declared a total loss, where the cost of repairs exceeds the value of the vehicle. On newer vehicles, the threshold for total loss is much higher. For all of these reasons, collision and comprehensive coverage tend to be cheaper on older vehicles and more expensive on older vehicles.
Likelihood of Vehicle Theft
Some cars are more attractive to thieves than others. Some cars are easier to steal, while other cars regularly appear in the top 10 most stolen cars nationwide. If you own a vehicle that is more likely to be stolen, then you’ll pay higher insurance rates. Insurers are required to cover the cost of your vehicle if it’s stolen (assuming you have comprehensive coverage).
Most companies alter insurance premiums based on your mileage. The average American drives around 8,000 to 12,000 miles per year. If you drive significantly less, then you could receive an insurance discount. If you drive significantly more, then you might pay higher insurance premiums. Today, all major insurers also offer usage-based insurance (UBI) and telematics (driver tracking) programs. Insurers will track your vehicle usage, including the times of day at which you drive, your average mileage, and your driving habits. Then, they’ll give a customized insurance premium based on your driving habits.
Your credit score impacts insurance premiums. Statistics tell us that drivers with good credit scores tend to make fewer claims than drivers with bad credit scores. Insurers use something called your credit-based insurance score to calculate your premiums. It’s very similar to your credit score, although it uses slightly different metrics to calculate the score.
Three states have banned the use of credit scores for calculating insurance premiums, including California, Hawaii, and Massachusetts.
Your profession can impact your insurance premiums. Certain professions are eligible for discounts from certain insurers. First responders, police officers, teachers, nurses, and members of the military, for example, can get discounts of 5% to 10% from certain insurance companies. Additionally, if you are a member of a professional group – like a professional association or a union – then you may be eligible for certain insurance discounts through that group.
Do you use your vehicle for business or pleasure? Do you commute to work 100 miles each day? Or do you work from home? Do you use your vehicle to drive for Uber or Lyft? The way you use your vehicle will impact insurance premiums. If you use your vehicle for business, then you may need to buy special commercial insurance. Rideshare drivers, meanwhile, may need to buy a special rideshare policy to remain covered. You may even need to buy special insurance if you occasionally use your vehicle for work – say, if your boss tells you to drive a box of documents from one office to the other.
Coverage and Deductibles
Some drivers choose the minimum required level of insurance coverage. Other drivers buy over $1 million of coverage. Some drivers have low deductibles, while other drivers have very high deductibles. Depending on your coverage and deductibles, you will pay higher or lower rates for car insurance.
Years of Driving Experience
How much driving experience do you have? A 45-year old driver would normally pay low insurance rates – unless that 45-year old driver just bought his first car and has no insured driving history. Insurers will adjust premiums based on your years of driving experience, and drivers with more experience will pay lower rates than drivers with less experience.
Final Word on the Factors that Determine Your Auto Insurance Rates
Compare insurance quotes today to ensure you get the best possible deal on insurance. Just because you live in a bad ZIP code, have multiple at-fault accidents, and drive a high-value vehicle doesn’t mean you have to pay costly rates for car insurance.
By comparing quotes today, you can find insurers that emphasize certain factors but not others.
Enter your ZIP code into our online form to start comparing insurance quotes from top insurers in your area.