Factors that Affect Car Insurance Rates

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Car insurance rates are influenced by a range of factors that insurers use to assess risk and determine the likelihood of future claims. Key considerations include your driving record, age, and location, as well as details about the vehicle itself, such as its make, model, and safety features. Personal factors, like your credit score and marital status, can also play a role, as insurers look for indicators of reliability and stability. Even lifestyle elements, such as how many miles you drive annually, can impact your premium. Understanding these factors can help you make informed decisions and potentially lower your insurance costs.

Read our guide to learn more about the factors that affect your car insurance rates and how you can save.

What factors affect car insurance rates?

When it comes to auto insurance rates, there’s no one-size-fits-all. Insurance premiums vary by driver and are determined by a number of rating factors. Some factors, such as location and age, can have a huge impact on your insurance costs, while others, like your marital status, carry less weight with your insurer.

Below are some common rating factors that most companies use to decide car insurance rates.

1. Age

Age is one of the major factors that many car insurance companies consider when setting rates. The cost of auto insurance for teen drivers is substantially higher than it is for adult or senior drivers. For example, our data shows that a 16-year-old female pays an average annual premium of $6,767, while a 25-year-old female pays an average annual premium of $2,224.

Rates are higher for teens because they have less driving experience, are more prone to risky behaviors, and have a higher likelihood of being involved in accidents compared to adults and seniors.

2. Location

Your location can greatly influence your car insurance rates, as each state has its own regulations and laws that insurers consider when determining your premium.

Car insurance rates vary by state due to differences in local regulations, traffic laws, and the overall risk level in each area. States with higher rates of accidents, theft, or severe weather conditions may see higher premiums, as insurers factor in these risks. Additionally, some states require more extensive coverage or have different minimum liability limits, which can also affect the cost of insurance.

3. Gender

Most states allow insurers to base car insurance rates on gender since crash statistics are different for males and females. Data shows males are more likely to crash — especially in the early years of driving.

A study by the IIHS found that crashes involving male drivers are generally more severe than those involving female drivers, which is why insurers often adjust rates accordingly. Here’s a breakdown of what male and female drivers typically pay for car insurance.

Gender	Average annual premium
35-year-old male	$1,949
35-year-old female	$1,944

4. Driving record

Drivers with a clean driving record not only qualify for better rates but are also eligible for generous good/safe driver discounts.

If you have an accident or moving violation on your record, such as a speeding ticket or DUI, you end up paying higher car insurance rates.For example, our data reveals that the average annual premium of $1,986 increases by 26% to $2,500 after a speeding ticket and rises by 102% to $4,005 following a DUI.

5. Credit score

Insurance companies don’t rely on the same credit score that lenders do; instead, they develop a separate credit-based insurance score that estimates a driver’s likelihood of filing a claim. While a lender’s credit score assesses a person’s ability to repay debt, an insurance score is crafted to predict risk using many of the same factors, such as current debt, length of credit history, recent credit inquiries, and types of credit. Though these scores are calculated differently, they still reflect an individual’s overall credit status.

According to the Insurance Information Institute, individuals who manage their credit well tend to file fewer claims, further lowering their risk profile.

If you have a low credit score, you’re likely to face higher premiums. Additionally, policyholders with very poor credit may need to pay the full 6- or 12-month premium upfront before the policy can be issued. Below you’ll see how much premiums can change depending on your credit.

Credit rating	Average annual premium
Fair credit	$2,275
Poor credit	$3,377

6. Vehicle type

New sports cars typically come with higher premiums than older models because insurers consider the potential replacement costs when setting rates.

Your insurer will also consider factors such as:

Purchase price
Theft rate
Cost of repairs
Accident rate
Safety tests

A high safety rating doesn’t necessarily mean a car will be inexpensive to insure. Vehicles equipped with advanced safety features, like collision-warning systems, may actually increase insurance costs if those features are costly to repair or replace.

7. Annual mileage

The less you drive, the lower your risk of an accident, which is why car insurance companies factor annual mileage into your premium. Long commutes or high mileage can lead to higher premiums, as they signal a greater risk for insurers. If your annual mileage decreases, be sure to inform your insurer—you could see a reduction in your rate.

8. Claims record

Insurance companies don’t just look at your driving record but also gather reports on what claims you’ve filed with them or previous auto insurers. At-fault claims will likely result in a surcharge, while not-at-fault collisions and comprehensive claims may not.

If you’ve had three claims in three years, auto insurance providers are going to see you as risky to insure and either hike up your rates or decide not to renew your policy at the end of the term. A few accidents and claims make you a riskier driver, so insurers charge you higher rates.

9. Coverage level

When selecting car insurance, the amount of coverage you choose can have a big impact on your policy costs. Opting for higher limits, such as the recommended coverage limit of 100/300/100, may cost more — but this extra protection could prove invaluable in an emergency.

While purchasing only the bare minimum car insurance coverage may be tempting in terms of saving money, it could leave you financially exposed if you’re in an accident.

Liability car insurance: Liability coverage pays for injuries and damage to other people’s property if you are at fault in an accident.
Comprehensive and collision coverage: Comprehensive insurance provides protection against natural events such as floods, hail, etc. While collision insurance covers damage if you hit another vehicle or object.
Underinsured/uninsured motorist coverage: This protects you if an uninsured driver hits you or the other driver doesn’t carry enough coverage.
Personal injury protection: PIP is mandatory in some states and optional in others. It pays your medical bills and covers lost wages, irrespective of who’s at fault.

10. Marital status

Studies published by the National Library of Medicine indicate that married drivers tend to be less risky on the road, with single drivers being twice as likely to be involved in an accident. As a result, many car insurance companies offer married couples discounts. Married couples may also qualify for additional savings when they combine policies, such as multi-car and multi-policy discounts for bundling coverage with the same insurer.

12. Previous insurance coverage

Insurance companies consider drivers with continuous coverage to be lower risk, meaning a consistent auto insurance history can lead to better rates. It doesn’t matter if your previous policy was with your current insurer or a different one—maintaining coverage counts. However, staying insured with the same company for several years can also qualify you for a loyalty discount, adding to your savings.

How to get affordable car insurance rates

You can’t control your age or gender, but there are some factors you can control. Keep a clean driving record, build a good credit score, purchase a vehicle with affordable insurance rates, and choose the right coverages for your needs. Additionally, explore discounts like bundling multiple policies or reducing annual mileage to save even more on your premiums.

Just because your rating factors aren’t perfect doesn’t mean you can’t get better rates. Shop around to find an insurer that offers you the most affordable rates for your profile.

Sources:

Insurance Information Institute. “What determines the price of an auto insurance policy.” Accessed November 2024.

Insurance Information Institute. “Credit and insurance scores.” Accessed November 2024.

Insurance Institute for Highway Safety. “Fatality Facts 2020 Males and females.” Accessed November 2024.

National Library of Medicine. “Motor vehicle driver injury and marital status: a cohort study with prospective and retrospective driver injuries.” Accessed November 2024.

Shivani Gite

Contributing Writer

Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions.