Factors That Affect Car Insurance Rates

One of the best strategies you can employ when trying to lower your car insurance rates is knowing how insurance companies crunch the numbers. Understanding how insurers calculate rates can help you stay within the lines they’ve drawn and be rewarded with lower premiums. 

To help you do that, here are 12 factors that affect car insurance rates.

Please Note: Figures in our content are only averages at the time the data was gathered and does not represent actual insurance rates. We recommend contacting a licensed car insurance agent for accurate car insurance rates.

#1: Your State’s Minimum Requirements

When you talk with an insurance agent about car insurance, they’ll probably quote your state’s minimum requirements and then quote you higher limits. While choosing the minimum required limits to keep your rates lower may be tempting, you also want to be sure you’re adequately protected financially.

Different states require different amounts of minimum coverage. For example, here is the minimum coverage required by five states in different parts of the U.S.: Arizona, Texas, Wisconsin, Pennsylvania, and Oregon.

Sources: Arizona, Texas, Wisconsin, Pennsylvania, and Oregon Department of Motor Vehicles

As you can see, the minimum coverage required differs in each state. So be sure to know your state’s minimums before buying car insurance.

#2: Your Car’s Make and Model

The make and model of your car is a significant factor in determining your car insurance rates. For example, a 2023 Ferrari Testarossa costs a lot more to insure than a 2023 Ford Focus because the cost to repair or replace a Ferrari is many times higher than it would be for a Ford. Here is the average yearly rate for 2023 nationwide for some different car makes:

Source: Rateforce

Your car’s model will also make a difference in your rates. For example, a 4-door Chevrolet Silverado will be more expensive to insure than a Chevy Malibu from the same model year.

Some other factors car insurers consider for your vehicle are: 

• Age – the newer your car is, the more it will cost to insure. 

• Size – bigger cars and trucks cost more to insure than smaller vehicles because they cause more damage if a wreck occurs.

• Trim – the more features your car has, the more expensive your car insurance will be.

• Safety features – vehicles without advanced safety features like anti-lock braking and anti-theft devices pose more of a risk for insurance companies, which results in higher rates for you.

If you have an older model make and model worth less than it costs to insure it, consider liability-only coverage instead of full coverage. An experienced agent can help you decide. 

#3: Your Driving Record and High-Risk Violations

If you’ve been involved in multiple at-fault accidents and/or have one or more high-risk violations like a DUI or multiple speeding tickets, your cost for car insurance can be as much as twice as high as it is for someone with a clean driving record. And your rates can remain higher for anywhere from three to five years.

See how some different violations can substantially increase your rates:

Sources: Wallethub and The Zebra

Insurance companies consider drivers with a clean driving record a lower risk, which will get you lower rates. In addition, taking a defensive driving class or a driver’s education class in school may lower your rates even more.

#4 How Much You Drive

The amount you drive can also affect your insurance rates, as the less time you’re on the road, the less likely you are to get in an accident.

Insurance companies use mileage brackets when they calculate your rates. Every bracket you jump increases your rates. These are some standard mileage brackets:

Sources: Wallethub and CreditKarma

As you can see, the more miles you drive, the higher your rates will be because you are statistically more at risk of being involved in an accident, no matter how good of a driver you are. 

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#5: Your Credit History 

How you handle credit affects not only whether you qualify for a credit card or mortgage but may also affect your car insurance rates. Paying your creditors on time may help you get a lower insurance rate while paying late or defaulting on a loan could substantially increase your cost of car insurance. 

Some insurers use a “credit-based insurance score” when calculating your rates. Historical data indicates that the higher your score is, the lower the chance you’ll file a claim of any type. Conversely, a poor score means you’re seen as a higher risk by insurers, and you can pay as much as $1,500 more per year than drivers with good credit.

Insurers in every state will charge you more if you have poor credit. Here are the five most punitive in 2023:

Source: ValuePenguin

Five states prohibit insurance companies from using your credit score when calculating your rates: California, Hawaii, Massachusetts, Washington, and Michigan. 

#6: Where You Live and Park Your Car           

Not only are car insurance rates higher in some states than others, but the ZIP code where you live and where you park your car also factors into your rates.

For example, you would most likely get a lower car insurance rate living in the suburbs. The odds are lower in the suburbs that your car will be broken into or stolen. Your vehicle is less likely to be vandalized or stolen if it’s parked in your garage in Upstate New York than if it’s parked on the street in Brooklyn all night. 

In general, the location of where you primarily park your car at home affects your insurance rates. 

#7: Your Age 

If you ever had to pay for car insurance when you were a teenager, you know how expensive it was compared to your current age (if you’re 25 or older). Parents paying for car insurance for a teen can also attest to how costly it can be.

Why? Teen drivers have three things going against them when car insurance companies compare them to older drivers:

1. They’re less experienced behind the wheel
2. They’re more likely to speed
3. They’re involved in more accidents

Here are rates for some different age ranges for males: 

Source: Bankrate

You’ll notice how much lower the rates become when a driver turns 21 and again at age 25. The reason is that teens are involved in almost three times as many fatal car accidents as any other age group.

Also, notice how rates increase for drivers in their 70s. This is also due to statistics that show that as vision and reflexes slow as you age, you’ll be involved in more traffic accidents. Thus, the higher rates.

#8: Your Gender 

Women pay lower car insurance rates than men because they file fewer claims, and the dollar value of the claims they file is smaller. Unfortunately, the stereotype of the male teenage driver racing his friend is historically accurate, not that some females don’t also exceed the speed limit.

Here is a comparison of rates for male and female drivers by age:

Source: The Zebra

As both genders age, the difference in premiums becomes much smaller than when they’re in their teens.

#9: Your Marital Status

With most insurers, your marital status will affect your rates because you’ll probably be insuring multiple vehicles and be eligible for a multi-vehicle discount. You could also enjoy a lower rate because you’re no longer single, which again means statistically, your chances of being in a crash go down.

Source: The Zebra

Keep in mind that this is in a perfect world. Suppose one driver has poor credit, a bad driving record, or any other circumstances that negatively affect their car insurance rate as a couple. In that case, they may consider separate policies, which may save them money. 

#10: Your Coverage Level

Two types of coverage levels must be considered when getting car insurance quotes: liability-only coverage and full coverage.

Liability-only coverage provides coverage only for damage you cause, not damages you sustain. This is why liability-only might be better for you if you drive an older vehicle.

Full coverage includes comprehensive and collision coverages, which add coverage for any damage your vehicle sustains in an accident, regardless of who is at fault. Collision pays for your vehicle’s repair costs after an accident, while comprehensive pays for non-collision damages, such as vandalism, theft, fire, weather, or striking an animal.

RELATED: Types of Car Insurance Coverage Explained

#11: Your Insurance Company

The auto insurance provider you choose can also have an effect on your car insurance rates. 

Much depends on how many losses an insurer has experienced with any given factor. Using another example, insurers that cover cars parked outside along the coast will have different rates based on the ZIP code of the vehicle’s location and how many of their customers there have filed claims for hurricane damage, vandalism, theft, etc.

While insurance companies typically tend to use the same factors to rate your insurance, they weigh each factor differently. So it’s a good practice to get quotes from different car insurers every time your policy renews. You might find that your current insurer has raised their rates considerably since your last renewal.

#12: Your Discounts

Discounts are one factor that you have quite a bit of control over, and fortunately, there are a lot of car insurance discounts available to help keep your rates affordable. Here are some discounts you will want to be sure you're taking advantage of if you’re eligible:

• Bundle discount: having more than one type of policy with an insurance company, like car and home insurance, could lower your rates.

• Good student discount: students having a “B” or better average can receive a discount.

• Multi-vehicle discount: available if you insure more than one vehicle on the same policy.

• Loyalty discount: some insurers will lower your rates or your deductible for staying with them for a certain period.

• Safe-driver discount: a discount for being accident-free for 3-5 years, depending on the insurance company.

These are just a handful of the discounts you may be eligible for. Insurance discounts vary depending on the insurance provider. Speaking with your insurer can help to find discounts you qualify for. This is another reason why shopping with different providers for discounts may help you get lower insurance rates.

SteadyDrive Helps You Lower Insurance Rates

Although the factors we’ve looked at can all affect your car insurance rates, your actual driving habits are rarely considered. This is how SteadyDrive can save you money. SteadyDrive scores your driving for a few weeks. Safe drivers can receive a quote from leading insurers that reflects your driving. 

You should be rewarded for being a conscientious driver. Let the SteadyDrive app help!

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Disclaimer:

SteadyDrive is not an insurer or an insurance agent or broker. SteadyDrive does not provide you with an insurance policy, so make sure that you have insurance coverage while you drive. Please contact your insurer or an insurance agent or broker (if applicable) directly regarding questions you may have pertaining to auto insurance coverage. For more details, see SteadyDrive’s Terms of Service.