Jessica Fox Last Updated On: June 27, 2023

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Factors That Affect Your Car Insurance Rate

10 Important Points That Affects Your Car Insurance Rate

If you’ve ever wondered how insurance companies decide your car insurance rates, you’re going to want to keep reading. It may seem like insurers arrive at a magic number based on seemingly random information, but there’s a method to their madness—and understanding it can help you pay less for your car insurance.

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Factors Affecting Your Car Insurance Premiums

Many different factors influence how much you’ll pay annually for car insurance. Keep in mind as you go through the list of factors that some points are minor considerations (marital status) while others are more influential, like where you live.

One last thing to note is all car insurers use different calculations to arrive at your car insurance rate, so it’s always advisable that you shop around to make sure you’re getting the best deal.

These are the factors that affect your car insurance premiums:

  • Location Or Zip Code: Where you call home is important because, in most States, your zip code is an indicator of crime rates, car theft, and the likelihood of car accidents. So if you reside in the city, you’ll pay a higher insurance rate because the chances of getting into an accident are higher than someone who lives rurally.
  • Age: Young drivers and seniors over the age of 60 are the most likely to get into a car accident. Young drivers aren’t as experienced and distracted easily, while senior’s reflexes dull with age, making both groups vulnerable to accidents. According to the CDC, seniors are also more likely to incur serious injuries if they end up in a car accident.
  • Gender: Statistically, men under the age of 30 and over the age of 60 are more likely to get into an accident, so their rates will be higher than women’s. However, rates even out for both genders between 30-60.
  • Marital Status: Studies show that single, widowed, or divorced individuals are 2x more likely to end up in an accident than married couples. Married couple’s rates on average are 5-15% lower, and they’re eligible for additional discounts when insuring two cars.
  • Driving History: Your driving history consists of your experience (how many years you’ve been driving) and your record (how many driving infractions, like speeding tickets you have). Teen drivers are inexperienced and riskier, so their rates will be higher. So, the more experience you gain, the lower your rates. However, having speeding tickets may prevent you from receiving good driver discounts, while more serious offenses like DUIs will raise your premiums.
  • Car Make And Model: Owning a reliable vehicle can help reduce your rates, but if you drive a car known for being stolen, your rates will increase. Another consideration is certain models are associated with driving infractions, which means these models will come with a higher premium. Interestingly, all those new ‘collision detecting safety systems’ in new cars are still too new for their claims to be supported and currently will add to the cost of your car insurance — they’re expensive to repair.
  • Mileage: The more miles you put on your vehicle a year, the more you’ll pay in insurance — especially if you’re commuting to work. If you spend a great deal of time driving, you’re more likely to get into an accident; so you’ll pay more for car insurance. Commuters, therefore, will pay more because they drive more often than those that drive occasionally.
  • Previous Insurer: States and insurers don’t like to see a lapse in car insurance, and even a day between coverage can lead to higher premiums! If you spend extended periods out of the country, to prevent getting penalized, keep a non-owners auto insurance policy.
  • Credit History: Although controversial, those with low credit scores (under 600) are more likely to miss payments, commit insurance fraud, file more claims or inflate claims. In States that allow insurers to use credit history to determine your auto rates, those with very low credit scores will have to pay some or all of their coverage upfront.

  • Claims History: If you have a running list of claims on your record requiring insurer payouts, this will lead to higher premiums. At-fault claims over $2,000 (depending on State) usually mean you’ll pay a surcharge, while if you’ve reported 3+ claims in a year, your insurer will jack up your rates or won’t renew your policy.

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How To Lower Your Car Insurance Rates?

If you’re looking to reduce your annual car insurance rates, these are some measures you can proactively take:
  • Strive to be a good driver to eligible for discounts
  • Inquire about discounts
  • Shop around for the right coverage
  • Lower your deductible, but only if you’re a safe and good driver
  • If possible, reduce your mileage (e.g., carpool or take public transit to work)

How Your Car Insurance Rate Is Determined?

There’s a lot of research and statistics that go into determining your car insurance rate. For good driver’s this is a benefit as you’ll pay less. However, if it’s within your power to alter the factors working against you, like getting fewer speeding tickets, let the lower rates incentivize you to become a good driver.

Jessica Fox Jessica Fox has been a freelance writer for five years, with a specialty in health, wellness, and insurance. During this time, she’s written for some of the biggest B2B and B2C brands from around the world. Jessica is also the mother of two young daughters and loves coffee, writing, and working out.

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