10 factors that can affect car insurance costs
Insurance companies base car insurance rates on individual drivers’ profiles. Insurance companies consider various factors when calculating your auto insurance premium. Here are some criteria that insurance providers use.
ZIP code
Your location greatly affects your car insurance costs. If you live in an area with severe weather, natural disasters, or a high rate of vehicle theft, you might pay more for your policy. Insurance companies also use your ZIP code as a rating factor. It’s possible that the cost of car insurance in your ZIP code might be higher or lower than the next ZIP code over.[1]
Age
Car insurance companies consider your age when you apply for an auto insurance policy. In most cases, teenagers and young adults pay the highest rates for car insurance, due to their lack of experience behind the wheel. Drivers 16 to 19 years old have the highest accident rate among drivers.[2] As you get older, car insurance rates decrease steadily.
Gender
Your gender can also affect the cost of your car insurance. Women are generally less likely to get into accidents, including serious accidents, so they typically pay lower car insurance rates than men.[1] However, this assumes that all other factors, like age, location, and credit score, are equal.
California, Hawaii, Massachusetts, Michigan, Montana, North Carolina, and Pennsylvania prohibit car insurers from using gender as a rating factor.
Vehicle make and model
If you’ve ever insured multiple vehicles, you probably know that a car’s make and model can have a major effect on the cost of insurance. Used cars tend to be cheaper to insure than new cars or sports cars because they have less value and are less expensive to repair. Also, if your car has advanced safety features, you might be able to qualify for special discounts.
Driving record
One of the most notable factors that can affect the cost of car insurance is your driving record. In general, people with a clean driving record pay the lowest rates. If you have any auto accidents, speeding tickets, DUIs, or other traffic violations on your record, you’ll probably pay a much higher rate for insurance.[1]
Learn More: What Does DUI Mean?
Coverage levels
When you purchase auto insurance, you get to choose your own coverage limits. High coverage levels equate to higher premiums. While lowering your coverage levels can help you save money, most states require a minimum amount of coverage. Additionally, a minimum-coverage policy may not cover the full cost of an at-fault crash.
Deductible amount
When you file a comprehensive or collision insurance claim, you typically pay a deductible before insurance covers the rest of the costs. Choosing a higher deductible will result in a lower monthly premium. However, having a high deductible means you’ll receive a smaller payout in the event of a claim.
Credit history
In most states, car insurance companies are allowed to use credit-based insurance scores. The only states that don’t allow credit-based rates in car insurance are California, Hawaii, Maryland, Massachusetts, and Michigan.[3] Drivers with excellent credit typically pay lower premiums than drivers with poor credit because low credit scores are linked with higher insurance claim rates.[4]
Mileage
The less time you spend on the road, the less likely an accident is. Drivers who use their cars infrequently often pay lower car insurance rates. Some car insurance companies even offer mileage-based insurance policies, also called pay-per-mile insurance, which can help infrequent drivers get cheaper auto insurance.
Learn More: How Does Average Miles Per Year Driven Affect Car Insurance Rates?
Insurance company
If you’re wondering why your car insurance is so high, your insurance company might be to blame. Car insurance companies charge different rates for the same types of coverage and weigh rating factors differently. Using a quote-comparison platform allows you to compare rates from multiple insurers in one place, so you can see which company is the cheapest for your situation.