Top 12 Factors That Affect Car Insurance Rates

Everyone needs car insurance, but it seems like it gets more expensive with each passing year. There are several factors that affect the cost of car insurance and understanding how they affect your prices can be confusing.

However, car insurance formulas don’t have to be a mystery. Factors like age, marital status, and driving history are integral in how much you’ll pay for insurance. Once you understand what car insurance companies look at, it’s easier to figure out how to save.

Explore the top 12 factors insurance companies look at to determine your rates below. Then, compare quotes with as many companies as possible to find a policy that treats your unique situation best.

What are the top factors that determine car insurance rates?

Car insurance companies use complex formulas to determine how much you’ll pay for coverage. While insurance companies emphasize factors differently, they all look at the same things. You can learn about the 12 most common factors companies look at below.

1. State Requirements

One of the most important aspects of your insurance rates is the minimum car insurance requirements in your state. Due to differences in insurance requirements, you can see vastly different rates per insurance company based on your state.

Here are the average minimum coverage rates for some of the top-rated auto insurance companies across the United States.

As you can see, shopping around for insurance in your state and getting familiar with the minimum insurance requirements is critical. You could end up with significant savings on your monthly car insurance bill.

2. Age

Of all the factors that affect your insurance, age has one of the most significant impacts. Age is so important to your insurance rates that the difference in age groups can be up to 367%.

Some of the most expensive car insurance rates are for teen drivers. Statistically speaking, young drivers are more likely to drive distracted, engage in reckless behaviors, and get into accidents. Finding affordable insurance rates for teens is challenging, though prices start to drop around age 25.

While young drivers pay a lot for insurance, you might notice that rates also start to go back up around age 65. The reason for the increase is similar to why teens pay more — an increased likelihood of accidents. Older adults are also more likely to be injured in an accident.

3. The Make and Model of Your Car

There are a few reasons why some cars are more expensive to insure than others. One reason is simple — the more expensive the car, the higher the insurance will be. Expensive cars come with higher repair prices and more expensive parts, which your insurance company has to pay for when you make a claim.

Another reason is safety — some cars are safer than others. If you choose a car with a higher safety rating, you’ll see lower prices.

The type of car you have also plays a part in your insurance prices. For example, a truck is generally 3% cheaper to insure than a sedan, while people with sports cars pay much higher rates than SUVs.

A final aspect of your car that affects your rates is car theft numbers. If you have one of the most commonly stolen cars in America, you’ll pay more for insurance.

4. High-Risk Violations

Of all the auto insurance rate factors, high-risk violations can cause your rates to spike the highest.

High-risk violations include DUIs, multiple at-fault accidents, and other severe traffic incidents. These violations can increase your car insurance anywhere from 20% to 200%, depending on the severity of the incident.

Insurance after a high-risk violation always costs more than standard rates, but you can check how much it might cost below.

If your car insurance is too expensive after a high-risk violation, or if companies refuse to cover you, you might need to shop for high-risk insurance. High-risk insurance is more expensive than standard rates, but you’ll get the coverage you need to drive legally.

The good news about high-risk violations is that they don’t stay on your record forever. The amount of time a violation stays on your record depends on the incident, but it’s usually between three and seven years.

5. Credit Score

You might not realize it, but your credit score is an important factor in your insurance rates. You can keep your insurance rates down by keeping your credit score up. However, if your credit score is low, you might pay up to 60% more for insurance.

To get an idea of how credit scores affect your car insurance, check the rates below.

While your credit score is one of the major causes of higher insurance rates, you don’t have to pay higher prices forever. If you improve your credit score, your rates will decrease.

Not all states allow car insurance companies to look at your credit score. Car insurance in California, Hawaii, and Massachusetts is not affected by credit scores.

6. Driving Record

There are some factors you have no control over, such as your age or gender. One of the factors that affect the cost of car insurance that you can control is your driving record.

Drivers with clean records pay up to 40% less than people with speeding tickets, accidents, and other incidents. You can get an idea of how your driving record affects your rates below.

Like high-risk violations, incidents on your driving record aren’t held against you forever. If you keep your record clean, incidents only affect your rates for about three years.

While your rates will automatically be lower if your driving record is clean, you might be able to lower your rates even more by taking advantage of safe driver discounts.

7. Marital Status

Some factors that affect your insurance rates are obvious, like your driving record and location. Others, like your marital status, might surprise you.

Married people save on their insurance for a simple reason — they make fewer claims and get into fewer accidents.

Most major insurance companies offer a married discount. If you change your status from single to married, make sure to alert your company so they can lower your rates.

8. Gender

Most drivers know that men pay more for insurance than women. The price difference between genders is drastic for young people, but the gap lowers as you get older.

What makes car insurance more expensive for men? According to the Insurance Information Institute (III), men get into more accidents and engage in more reckless behaviors than women.

9. Yearly Mileage

Your car insurance rates will be higher if you spend more time on the road. The idea is that the more time you spend behind the road, the more likely you’ll eventually have to file a claim.

People who rarely use their car — for example, you work from home or use public transportation — will see much lower rates. If you drive less than the average American, you should consider usage-based insurance.

Usage-based insurance tracks your driving behavior and how much you drive. Usage-based insurance can cut your rates to a fraction of what you’d pay for standard coverage.

10. Driving Experience

One of the reasons young drivers pay more for insurance is that they don’t have very much driving experience. However, age and driving experience aren’t always connected.

No matter how old you are when you start driving, insurance companies will charge you more because you don’t have driving experience. People without experience are more likely to get into an accident, struggle to deal with dangerous weather, and drive with distractions.

The good news is that your rates won’t stay high forever. The more experience you have, the lower your rates will be.

11. Location

One of the most critical aspects of how car insurance rates are determined is where you live. Your location affects your rates for a variety of reasons, one of the biggest of which is how many accidents your neighbors get into.

Another factor that affects your rates is how safe or dangerous your neighborhood is. If your ZIP code has high rates of vandalism or theft, you’ll pay more for insurance. Likewise, areas that deal with frequent extreme weather or natural disasters will also pay more.

12. Insurance History

A final reason why car insurance can be so expensive is your insurance history. If you have gaps in your insurance history, you’ll pay more for your current coverage.

While it might not make sense to you, insurance companies think drivers who had a license but didn’t have coverage were driving without insurance. This is risky behavior that makes car insurance companies nervous.

This is why it’s important to maintain your car insurance coverage. Even a small gap can increase your rates dramatically. If you plan on canceling your current insurance, you should always make sure you have new coverage lined up first.

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How does time affect car insurance rates?

All of the factors listed above that affect your rates are unique to you. When you’re looking at what factors affect car insurance rates, one aspect that isn’t unique to you is time.

Insurance rates today are higher on average than they were 10 years ago. As seen through the first half of 2022, inflation plays a powerful role in the cost of just about everything, and car insurance is no different.

Car insurance rates increase over time due to more than inflation, though. Population growth, technological advancements that make cars more expensive to repair, and increased healthcare costs all play a part in making car insurance more expensive.

Tips to Save on Car Insurance

While there’s not much you can do about how your circumstances affect your car insurance, there are ways for you to save. Drivers looking to lower their car insurance costs should explore the following money-saving tips:

• Lower your coverage. While you’ll be at a higher financial risk if you get into an accident, you can save money by lowering the amount of coverage in your policy.
• Shop for new coverage. If your rates suddenly increase after your circumstances change, you don’t have to stay with your company. Shopping for a new insurance company can help lower your rates.
• Check for discounts. It’s always a good idea to periodically talk with an insurance representative about what discounts you’re eligible for. Sometimes, you might find new car insurance discounts to help lower your rates.
• Raise your deductible. Like lowering your coverage, raising your deductible can reduce your rates. However, you’ll pay more after an accident before your insurance kicks in.
• Reduce your mileage. If you can find ways to lower your yearly mileage, you’ll get lower rates.

These are quick ways to reduce your car insurance rates. You can also try solutions that will take longer, such as selecting a safe car, improving your credit score, and keeping your record clean.

Find the Lowest Rates for Your Situation

Understanding why your insurance rates are what they are can be confusing since companies look at so many factors. However, you can get an idea of what you’ll pay by comparing the average price of insurance for factors that apply to you.

Of course, one of the best ways to see how insurance factors will affect your rates is to request quotes from multiple companies. Looking at different companies is crucial in finding the lowest rate possible.

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