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7 Big Factors That Affect Your Car Insurance Rate

Bennett Floyd | March 8th, 2018

No two drivers are alike, and there are hundreds of different kinds of cars on the road. For this reason, auto insurance policies aren’t one-size-fits-all documents. Insurance companies have to consider many different factors when calculating your auto insurance rate.

But which factors affect your rate the most, and how can you help ensure you’re getting the best rate for you? Read on to find out.

1. Your Location

Where you live, work, and especially drive is one of the most important considerations insurers take into account when determining your rate. This is why when you’re looking for a car insurance quote, most insurance agents will ask you for your zip code first.

Why? Because your location may make you a higher risk.

For example, if you live in a densely populated area with a larger number of drivers, heavy traffic, or a higher crime rate, you may be more likely to make a claim on your insurance.

Unfortunately, apart from moving to another area, there’s not much you can do to change this aspect of your insurance rate. Fortunately there are other things you can do to lower your rate.

2. Your Car

Did you know that some cars cost more than others to insure? Some cars are more likely to be totaled in an accident, for example, and others are more likely to be stolen.

If you’re buying a car, we recommend you keep the following things in mind to help you get the best insurance rate:

Your car’s safety rating
Vehicles with a higher safety rating represent a lower risk to insurance companies.

Your car’s size
Larger, sturdier vehicles generally receive less damage in accidents, and, therefore, cost less to insure. However, be aware that some cars with a high engine-to-body-size ratio, such as many sports cars, may be more expensive to cover.

Your car’s age
The older your vehicle, the more likely it is to suffer mechanical failure, possibly causing an accident, or to become totaled in a car crash. In addition, older cars may be easier for criminals to break in to or steal, due to outdated anti-theft features.

Your car’s fuel source
If you own an electric vehicle, you may be saving on gas, but studies show you’ll pay an average of 21 percent more for insurance than you would for a car that runs on fossil fuels. This is most likely due to the fact that electric cars sell for higher values and cost more to repair than their gas-powered counterparts.

Pro tip: Buying a car with the four above factors in mind can make a big difference on your insurance rate, but for the sake of your credit report, we always recommend you purchase a vehicle that you can reasonably afford. If you need to finance your vehicle, make sure to make your payments on time each month to ensure a healthy credit score.

3. Your Credit Score

Speaking of credit, your credit score may affect your auto insurance premiums, depending on which state you live in. (Some states, namely California, Hawaii, and Massachusetts, don’t allow insurance companies to check your credit report when calculating your rate.)

Suffice it to say, a change in your credit score from excellent to less-than-excellent could cost you as much as $100 a month.

Pro tip: If you want to improve your credit score (and lower your insurance rate), we recommend you check out the following website.

4. Your Desired Coverage

The amount of coverage you want on your auto insurance policy also makes a significant impact on your rate. In particular, you’ll want to pay attention to the liability limits and deductibles detailed on your policy.

For example, a policy that covers only the minimum liability requirements in your state will typically cost less than a policy that offers more protection. However, don’t just write off extra coverage on your policy if you can afford it! Adding extra coverage, such as collision, comprehensive, or uninsured/underinsured motorist, can be surprisingly affordable and could save you big in the event of an accident.

Like liability coverage, the amount of your deductible (the money you pay on a claim before insurance pays) can impact your rate, too. As a general rule, the higher your deductible, the lower your premiums and vice versa.

Pro tip: Don’t just assume that you need a higher deductible in order to afford car insurance. In most cases, it doesn’t cost a lot to lower your deductible by as much as half.

5. Your Driving Habits

It probably goes without saying that the more you drive, the more likely you are to get in an accident. This is why auto insurance companies will typically ask you about your daily driving habits.

For instance, if you have a long commute to and from work, or you drive your vehicle for primarily commercial purposes—even if it’s only to deliver pizzas—this is something you need to tell your insurance company.

Pro tip: While disclosing this info could increase your rate, failure to do so could mean having your claims denied or your insurance revoked.

Not only does the amount of driving you do affect your rate, but so does the time of day when you drive. If you regularly work the graveyard shift, for example, that may increase your auto insurance premiums.

To help lower your premiums, consider walking, bicycling, or riding the bus to work more often, if possible. Or perhaps start carpooling with a friend or coworker!

6. Your Driving History

It probably comes as no surprise that your driving history reflects in your auto insurance rate. Your driving history contains two main components: your driving experience and your driving record.

Your driving experience is, simply put, the number of years you’ve spent driving. For example, teen drivers with little to no driving experience tend to be more expensive to insure. On the other hand, someone who’s been driving for 20 or more years will typically get a lower rate.

Your driving record, on the other hand, consists of any accidents or traffic violations you may have had while driving. This may include things like:

  1. Traffic tickets (especially speeding tickets)
  2. Car accidents
  3. Previous insurance claims
  4. Major moving violations, such as a DUI or reckless driving

Some of these items can stay on your record for up to seven years. To get the best possible rate on your insurance, drive safe, follow your state’s laws, and work toward having a “clean” driving record.

Pro tip: If one of the above applies to you, your state may require you to obtain an SR-22 form before you can get auto insurance.

7. You

Let’s not forget, perhaps the most important consideration in determining your auto insurance rate is you. Things like your age, your gender, your marital status, and loved ones you want to insure can make a big impact on your rate. So, let’s talk about them one at a time.

Your age
As mentioned previously in this article, younger drivers are seen as being at a greater risk for an accident than older drivers. And there’s good reason for this. Simply put, the younger you are, the higher your rate will likely be.

Your gender
Generally speaking, men pay more for car insurance than women. This is because some auto insurance companies use gender-specific driving data to help calculate rates, though some states do not allow this practice. These states include Hawaii, Massachusetts, Michigan, Montana, North Carolina, and Pennsylvania.

Marital status
Statistically speaking, married couples have been shown to be more averse to taking risks—at least when behind the wheel—resulting in less chances for getting into an accident.

Insured drivers on your policy
The number of drivers on your policy as can raise or lower your insurance premiums significantly, especially if you have teen children that you want to insure. Many insurers offer discounts on policies with multiple drivers, but your insurance company will still have to perform a risk assessment on each person.

The Easiest Way to Save …

On one last note, while you may or may not have control over some of the factors determining your auto insurance rate, there is one thing you absolutely can do. Talk to a licensed insurance agent. A trustworthy agent will tell you about any discounts you may be eligible for and help you get the most bang for your car insurance buck.

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