Factors that impact your cost of car insurance

Car insurance is a mandatory state requirement for most drivers, but the price you pay for your car insurance can vary. Car insurance companies use a variety of factors to determine the cost of car insurance. Your age, gender, state of residence, and driving record all play a role in determining your car insurance rates.

Before purchasing or renewing your auto insurance policy, it is important to understand what factors influence insurance rates in order to find the best car insurance rates for your household.

What factors affect car insurance rates?

When you buy car insurance, your insurer will need several pieces of information in order to quote you a premium. To make the process of shopping around easier, you can usually prepare information about yourself, your vehicle, and your insurance history ahead of time.

Credit score

Your credit score is important for more than just a car loan; it is also a factor when applying for car insurance.

However, some states prohibit the use of your credit score when calculating car insurance rates. California, Hawaii, Massachusetts, Michigan, and Washington are among them. Other factors are more important in these states.

If you're wondering why your credit score is so important, it's because it's used to forecast future behavior. “Credit has been used in the insurance industry since the 1990s to assist carriers in assessing the risk of claims being filed,” says Cynthia Moore of Salzburg Insurance in Norfolk, Virginia. According to her research, people with lower credit scores are statistically more likely to file claims than those with higher credit scores. As a result, insurers may charge a higher premium to account for the increased risk.

Average annual car insurance premiums by credit rating

Location

Every aspect of your location, from your state to your city and even down to your ZIP code, influences the amount of your premium. According to John Espenschied of XXXX, the state in which your vehicle is parked or garaged is a huge factor. “Rates by state can vary by up to 400 percent, with Louisiana having one of the highest rates in the country,” he warns. According to Espenschied, “twelve states require personal injury protection (PIP) coverage, which significantly raises the cost of car insurance.” “These are known as no-fault states, and they require your insurance company to pay for your bodily injury regardless of fault if you are involved in an accident.”

According to Moore, your garaging ZIP code provides population size information, which can influence the likelihood of thefts and accidents. Those who live in high-risk areas may face higher premiums as a result of related causes of loss. For example, the NICB reports that Hurricane Harvey damaged over 422,000 insured vehicles, while Hurricane Katrina resulted in approximately 300,000 claims and Superstorm Sandy resulted in 250,500 claims.

Prior insurance

Your insurance history influences your car insurance rates in two ways. According to Espenschied of Insurance Brokers Group, prior insurance demonstrates that you have consistently maintained insurance – which is required in all states except New Hampshire. “People who drive without insurance and then decide to buy insurance have a much higher likelihood of cancelling,” he says, “especially if purchased simply to renew license plates or go to court to show proof of insurance.” However, if you've been with the same insurance company for five years or more, Espenschied says you'll usually qualify for lower rates. “It demonstrates longevity and a willingness to maintain insurance year after year.”

However, if you have lapsed in coverage, it may work against you. Some insurance companies may charge you more to cover the added risk.

Driving record

Even if you have a long insurance history, bad driving habits can raise your premiums. Having incidents on your driving record may cause insurers to view you as a high-risk driver and charge you higher rates. Those with clean driving records, on the other hand, may be able to find lower rates and qualify for additional savings, such as safe driver and claims-free discounts.

Age and gender

Throughout your driving career, your rates will rise, fall, and rise again based solely on your age. According to the IIHS, teen drivers have four times the number of crashes as drivers aged 20 and up. Inexperience and risky habits are frequently to blame. On the other end of the age spectrum, the Institute reports that drivers over the age of 70 have higher crash rates than middle-aged drivers – though not as many as young drivers.

Gender also plays a role, with young men being less likely to wear seatbelts and more likely to purchase faster vehicles.

“Men typically have higher premiums than women, particularly under the age of 25,” says Moore of Salzburg Insurance. “Rates remain level between 30-65, and then, with most carriers, you will begin to see an increase in rates for drivers over 65, particularly those over 75.” When asked why, Moore explained that studies show that older drivers have a slower reaction time and poor vision, which leads to an increase in claims.

Vehicle

You'd think that a new vehicle would cost more to insure than an older one, but it's not always that simple. Because of the new parts, newer cars are typically more expensive to insure. However, if your new car qualifies for additional savings, such as having safety features, it may be less expensive to insure than a car from a previous year.

Size, in addition to newness, is an important consideration. You may be able to better predict car insurance premiums if you know the make and model of the vehicle.

Ways to lower your insurance premium

Regardless of rate factors, there are additional ways to reduce your car insurance premium and save money on your policy.

• Inquire about discounts: Many insurance companies offer various types of car insurance discounts, such as claims-free, loyalty, and pay-in-full.
• Bundle your insurance: By combining your home and auto insurance policies with the same company, you can save money on both. Other types of insurance, such as condo, boat, life, and health insurance, could also be bundled.
• Choose a higher deductible: According to Drew Scott, senior vice president of Scott Insurance in Stratford, CT, this can be a beneficial approach, but to see significant savings, you may want to choose a higher deductible for multiple vehicles. Keep in mind that, while your monthly payment will be lower, your out-of-pocket expenses will be higher if you are in an accident.
• Rethink your claims: Espenschied advises against filing or contacting your insurer about minor claims. Even if no money is paid out, Espenschied claims that all claims, even zero-payout claims, require time, money, and energy to investigate.
• File a claim with the other driver's insurance: If someone dings your car, Espenschied recommends filing a claim with their insurance company before contacting your company. “Chances are, the other party will be willing to pay you directly for a minor claim so that it does not appear on their record at renewal time.”

Add safety features

If your vehicle lacks adaptive headlights, anti-theft devices, blind spot detection, rear-view cameras, or anti-lock brakes, you could save money by having them installed. Many insurance companies provide discounts for safety features. Furthermore, the increased security may reduce your chances of an accident.

Shop around

Whether you currently have a policy in place or are nearing the end of your policy period, it may be worthwhile to shop around for car insurance at least once a year to ensure you are paying the best price for your coverage. You may discover that switching carriers will result in lower rates, which is useful information to have before your policy's renewal date.

Frequently asked questions

How does carrying higher state minimum liability limits affect car insurance rates?

Although carrying the state's minimum requirement for car insurance is the cheapest option, having higher insurance limits may be advantageous. For example, if you are involved in an accident where the expense exceeds your liability-only coverage, you will end up paying more out of pocket than if you were involved in a covered accident with collision and comprehensive coverage.

Can your annual mileage make a difference in car insurance rates?

Your car insurance rates may be affected by how frequently you drive and how much mileage you put on your vehicle in a given time period. Drivers who use their car less frequently may be eligible for low-mileage or reduced use discounts if they meet certain eligibility criteria.

How does marriage affect car insurance premiums?

Marriage may affect your rates because you will most likely add your spouse to your policy once you are married. Although whether your premium rises or falls is largely determined by your individual circumstances, some insurers do offer discounts that married policyholders may be able to take advantage of, such as multi-car discounts for insuring more than one vehicle.

Methodology

StrongInsurance analyzes 2021 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. using Quadrant Information Services. The rates quoted are for a 40-year-old male and female driver with a clean driving record, good credit, and the following full coverage limits:

• $100,000 bodily injury liability per person
• $300,000 bodily injury liability per accident
• $50,000 property damage liability per accident
• $100,000 uninsured motorist bodily injury per person
• $300,000 uninsured motorist bodily injury per accident
• $500 collision deductible
• $500 comprehensive deductible

StrongInsurance used minimum coverage limits that meet each state's requirements to determine minimum coverage limits. Our typical driver owns a 2019 Toyota Camry, commutes five days a week, and drives 12,000 miles per year.

These are sample rates that should only be used for comparison.