15 Factors That Affect Car Insurance Rates
Car insurance rates depend on many factors. Each factor affects the premium you pay. Knowing these factors can help you save money.
Let’s look at the 13 key factors that impact car insurance rates and how they affect your costs.
- Age – Insurance companies consider your age as one of the most important factors. Teenagers and new drivers often have less experience and are more prone to engaging in risky driving habits. This often leads to higher insurance premiums for young drivers. The cost difference between rates for teens and rates for 50-year-olds can be surprising. It can average over $5,500 per year, which is quite a lot.
Car insurance rates usually start going down around the age of 20. As you gain more experience, the rates continue to decrease. By your mid-50s, car insurance costs are typically at their lowest. However, they start to increase again once you reach the age of 70 or older.
- Credit Score – Your credit score can impact how much you pay for car insurance. This may be surprising to you. Insurance companies have found a connection between credit scores and the likelihood of filing claims. Drivers with poor credit tend to file more expensive claims than those with good credit. The difference in insurance rates is substantial. People with lower credit scores pay over $1,500 per year, while those with excellent credit pay less.
Having a lower credit score can result in a $784 rise for a six-month policy. This means an additional $130 per month. Therefore, maintaining a good credit score can help you secure lower insurance premiums.
- Driving Experience – Your years of driving experience directly impact your insurance rates. The more you drive, the fewer mistakes you’ll make that result in violations and claims. When you are less concerned about the risk, insurance companies find you more appealing as a customer. As a result, experienced drivers enjoy lower insurance premiums compared to new drivers.
As a new driver, your insurance prices might be higher at first. However, as you gain more experience, your rates will likely become more favorable. Insurance providers offer safe driving programs. These programs can lead to discounts for good driving behavior over time.
- Driving History – Car insurance companies believe that your driving history can help determine how you will drive in the future. If you have previous violations or tickets, you may have to pay more for insurance now and in the future. Let’s examine how specific driving offenses can affect your rates.
If you receive a speeding ticket for going 16-20 mph over the limit, your insurance premiums may go up. The extent of the increase depends on your insurance company’s policies and how severe the offense is.
DUI (Driving Under the Influence) can lead to higher car insurance rates. This offense is considered a big risk, so insurance companies change how much you pay for insurance.
A reckless driving charge is similar to a DUI. It shows risky behavior on the road, which results in higher insurance costs. To keep your rates in check, it’s important to drive responsibly and avoid these violations.
- Location – Location matters when it comes to car insurance rates, both at the state and ZIP code levels. Car insurance is regulated by each state, and this can affect how much it costs. States like Michigan, a no-fault state, have specific mandates that impact insurance pricing. For example, in Michigan, drivers must have unlimited Personal Injury Protection (PIP) coverage by law. This leads to higher insurance costs compared to nearby states like Ohio.
Insurance companies adjust rates based on ZIP codes to account for factors in each area. Areas with higher population, increased risks of floods, wildfires, or crimes, and other factors may have higher insurance costs. On the other hand, rural areas often have lower car insurance premiums compared to urban areas.
- Gender – Gender can impact car insurance rates, especially for young drivers. On average, male teen drivers pay higher premiums compared to their female counterparts. Car insurance companies charge higher rates to young male drivers because they are seen as more prone to taking risks. On average, young female drivers have safer driving habits compared to others. As a result, they generally receive lower insurance rates.
As drivers gain experience and have a safe driving record, the rate differences based on gender become less important.
- Insurance History – Your insurance history can affect the cost of your car insurance. Specifically, having continuous coverage can influence your rates. Insurance companies see not having continuous coverage as a sign of more risk. If you had a license but didn’t have insurance at any time, insurance companies might see you as someone who drove without coverage. This can make it harder for you to get insured because they view you as a riskier customer.
Consider how drivers with no prior coverage compare to those who have had five years of continuous coverage. This gap in insurance history can result in a saving of around $182 per year on your premiums. Maintaining continuous coverage demonstrates responsibility and can lead to more favorable rates.
- Mileage – The number of miles you drive each year can greatly affect how much you pay for car insurance. This is especially true in states like California. The difference in yearly premiums between drivers who travel less than 7,500 miles and those who drive over 15,000 miles is $92 on average across the country. However, in California, the difference is much larger. In California, this variation can be almost 32%. It means low-mileage drivers can save $557 per year.
It’s essential to accurately estimate your annual mileage when obtaining insurance quotes. Overestimating or underestimating your mileage can lead to inaccuracies in your premium calculations.
- Coverage Level – The level of coverage you choose directly affects your insurance premiums. To make sure you have enough coverage to protect your assets without paying too much in premiums, it’s important to find a balance. The price gap between basic and comprehensive car insurance can be over $1,000 per year.
Insurance companies determine premiums based on the coverage limits you select. If you have higher coverage limits, your insurance company has to pay more when you make a claim. This can make your premiums go up. If you choose lower coverage limits, your premiums may decrease. However, this could mean you don’t have enough insurance if a major accident happens.
- Insurance Company – The insurance company you choose affects how much you pay for car insurance. Insurance rates can vary a lot between companies. Different insurers might have special discounts or ways of deciding prices that could be better for you personally.
Shopping for insurance quotes and comparing companies can help you find the best rate. Make sure you’re not paying too much for car insurance just because your current company has higher rates than others.
- Marital Status – Your marital status doesn’t have a big impact on your car insurance rates. We’ve seen that married drivers often share driving duties, so they make fewer claims. While this factor doesn’t cause major rate changes, it’s still worth thinking about along with your overall driving record.
- Claims History – Insurance companies consider your claims history as a crucial factor. Whether you filed claims or they were filed against you, a long history can cause concerns. If your insurer pays a claim, it’s likely your rate will go up. Now, let’s see how rates with different insurers can change after an at-fault accident.
- Vehicle- The vehicle you drive affects your insurance rates. If you own a new sports car, your premiums will probably be higher than if you had an older, more practical car, like a Civic. When insurance companies calculate premiums, they consider the cost of replacing the vehicle, especially for collision and comprehensive coverage. It’s important to know how different vehicle types can impact your insurance costs.
- Vehicle Ownership Status – Car insurance companies group vehicle ownership into three main categories: owned, leased, and financed. Your ownership status can affect your premiums, so it’s important to understand how it can impact the cost of your car insurance.
- Discount Options – To lower your car insurance rates, you can take advantage of available discounts. These discounts depend on where you live and the insurance company you select. They often reflect your individual rating factors. Here are some common discounts you might be eligible for:
- Affinity discount
- Anti-theft device discounts
- Bundling policy discount
- E-Pay discount
- Good driver discount
- Good student discount
- Green vehicle discount
- Low mileage discount
- Loyalty discount
- Military discount
- Multi-vehicle discount
To save on car insurance, ask your provider about available discounts. Being proactive can lower rates while keeping your needed coverage.
Frequently Asked Questions
While age is a significant factor in determining rates, it’s not the only one. Other factors, such as your driving history and the coverage you carry, also play a role. As you get more experience and keep a good driving record, your rates usually become better.
Insurance companies have discovered a link between credit scores and the chances of making claims. People with lower credit scores are considered higher risk. It’s essential to manage your credit responsibly to maintain lower insurance premiums.
Location encompasses both state-level regulatory differences and ZIP code-specific factors. State regulations affect insurance prices. ZIP codes help insurers set rates based on local risks. Understanding both aspects can give you insights into why your rates may vary.
Car insurance rates depend on many different factors. These factors all affect how much you have to pay for your insurance premium. Understanding these factors can help you lower your rates while still keeping good coverage.
Your age, credit score, driving history, location, and choice of insurance company all affect how much you pay for car insurance. To get the best rate for you, use tools to compare quotes and keep these influencing factors in mind.