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Factors that impact your cost of car insurance

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Key takeaways

  • Your vehicle type, motor vehicle record and previous claims history are a few factors that determine car insurance rates.
  • The type of vehicle you drive, how frequently you drive and the coverage you choose also makes a difference.
  • Asking about discounts, bundling policies and only filing claims when necessary are ways to potentially save on car insurance.

Every person is a unique individual, with distinct characteristics and circumstances that shape who they are. Car insurance companies recognize this diversity and utilize rating factors to group individuals with similar traits in risk pools, allowing for more accurate premium calculations. However, they also consider factors that set people apart, such as driving history, claims history, vehicle type and more, to tailor insurance premiums to each driver’s specific risk factors. Understanding the car insurance rating factors you can change and those you can’t may help you get cheaper car insurance.

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What factors affect car insurance rates?

Your driving history is a significant determining factor in calculating your car insurance premium. Length of driving experience, prior insurance, driving record and claims history are specific to you and are a part of your risk assessment when getting a car insurance quote. Other factors like location, age, gender and annual mileage impact your policy rate, but an increase in incidents from other drivers in the same risk group as you can also impact your rates. For example, if the rate of accidents in your ZIP code increases, the rate of your car insurance premium can also increase at renewal, even if you don’t file a claim.

Driving record

Drivers with clean motor vehicle records and no at-fault accidents typically get the cheapest car insurance. An at-fault accident will usually cause rates to increase more than a speeding ticket conviction. But if you have a severe infraction, like a DUI conviction, you can expect your rates to increase substantially. For some high-risk drivers, especially those with a DUI conviction or multiple convictions and accidents in a short window, some insurers may deny coverage. These drivers may need to find high-risk car insurance or seek out coverage through nonstandard car insurance companies or state-backed high-risk pools.

Average annual full coverage premium
Clean driving record $2,014
Speeding ticket conviction $2,427
Accident $2,854
DUI conviction $3,901

Prior insurance

Prior insurance shows that you have continually maintained insurance, which is a sign of responsible behavior that can indicate you are a lower risk to insurance providers. Levi A. Kastner, owner-agent of Kastner Insurance Group in Lafayette, Louisiana, explains: “Insurance companies use many data points to figure out rates, and one of those data points that is heavily relied upon is ‘do you have a current insurance policy in place?’ Insurance companies prefer to do business with clients that handle their business because statistically, if you take care of your business, like not letting your insurance policy lapse, they see that as a favorable trait in clients they want.”

However, if you have had a lapse in coverage, it could work against you. Some insurance providers may charge you more to cover the additional risk.

Credit history

Your credit history is important for more than just a car loan; it could also be an influencing factor when you apply for car insurance. Although insurance companies don’t use your direct credit score, they may reference what is called a credit-based insurance score. Statistically, people with lower credit scores are more likely to file claims than those with higher credit scores. Insurance companies deem drivers with lower credit scores as higher risk and usually apply higher premiums as a result.

However, this is a controversial topic as there are concerns as to whether credit scoring models are fair and equitable to everyone. Some states do not allow the use of your credit history when calculating car insurance rates: California, Hawaii, Michigan and Massachusetts.

For drivers in states where credit is used, working to improve your credit score is one way to potentially lower your car insurance rate.

Average annual full coverage car insurance premiums by credit rating

Poor Average Good Excellent
National average $3,479 $2,176 $2,014 $1,764

Location

Every aspect of your location could play a role in determining your premium, including your city and even your ZIP code. Since each state has different minimum car insurance requirements for drivers, car insurance rates vary depending on your location. Twelve states require personal injury protection (PIP) coverage, which can significantly impact the cost of car insurance, while other states have optional medical payment coverage options.

Your garaging ZIP code provides details of population size, accident frequency, theft and vandalism in your area. However, it is important to note that, in California and Michigan, car insurance companies are not allowed to use your ZIP code to determine your rates, along with several other non-driving insurance factors.

Those who live in severe weather areas may also face higher premiums due to related causes of loss. For example, the National Insurance Crime Bureau (NCIB) reports that more than 422,000 insured vehicles were damaged by Hurricane Harvey in 2017, about 300,000 claims after Hurricane Katrina in 2005 and 250,500 claims following Superstorm Sandy in 2012.

  • State Average annual full coverage premium Average annual minimum coverage premium
    Alabama $1,843 $441
    Alaska $1,946 $421
    Arizona $1,810 $587
    Arkansas $1,907 $443
    California $2,291 $636
    Colorado $2,121 $500
    Connecticut $1,533 $620
    Delaware $2,103 $801
    Florida $3,183 $1,128
    Georgia $2,085 $639
    Hawaii $1,275 $344
    Idaho $1,133 $267
    Illinois $1,806 $552
    Indiana $1,295 $327
    Iowa $1,315 $223
    Kansas $1,878 $416
    Kentucky $2,124 $678
    Louisiana $2,909 $815
    Maine $941 $225
    Maryland $1,971 $815
    Massachusetts $1,262 $429
    Michigan $2,691 $1,104
    Minnesota $1,760 $585
    Mississippi $1,771 $446
    Missouri $1,943 $490
    Montana $1,889 $310
    Nebraska $1,624 $359
    Nevada $2,779 $973
    New Hampshire $1,262 $319
    New Jersey $1,754 $782
    New Mexico $1,591 $346
    New York $3,139 $1,371
    North Carolina $1,446 $432
    North Dakota $1,302 $269
    Ohio $1,266 $338
    Oklahoma $1,998 $406
    Oregon $1,415 $616
    Pennsylvania $2,040 $428
    Rhode Island $1,886 $551
    South Carolina $1,532 $524
    South Dakota $1,553 $276
    Tennessee $1,429 $371
    Texas $2,109 $565
    Utah $1,510 $539
    Vermont $1,061 $238
    Virginia $1,439 $494
    Washington $1,410 $515
    Washington, D.C. $2,072 $607
    West Virginia $1,580 $421
    Wisconsin $1,292 $358
    Wyoming $1,582 $263

Age and gender

Depending on the state, your rates will likely increase and decrease based solely on your age or length of driving experience. Teen drivers are involved in four times as many crashes as drivers who are 20 or older. This is often a result of inexperience and risky habits. At the other end of the spectrum, drivers over the age of 70 have higher crash rates than middle-aged drivers—although still not as many as young drivers.

Gender also plays a factor in calculating car insurance rates in many states. According to the Insurance Institute for Highway Safety (IIHS), male drivers are more likely to speed, drive while impaired and skip wearing their seatbelts, which may explain the trend toward higher premiums. The total number of vehicle deaths for males was more than double compared to females every single year between 1975 and 2020.

However, data from recent years shows this disparity among genders is narrowing, a trend greatly attributed to the increase in vehicle safety features. Crash statistics show that every decade, the newer vehicle models reduce deaths for both genders. In fact, since 1975, death rates have decreased 14 percent for males and 10 percent for females.

The following states do not allow the use of gender as a determining factor in calculating premiums: California, Hawaii, Massachusetts, Michigan, North Carolina and Pennsylvania.

Average annual full coverage premiums by age and gender

Male Female Difference
18-year-old $6,541 $5,679 $862
25-year-old $2,552 $2,393 $159
40-year-old $2,020 $2,008 $12
60-year-old $1,832 $1,816 $16

*18-year-old rates are for drivers on their own policy.

Vehicle

While new vehicles often cost more to insure than older ones, it is not always that simple. Newer cars tend to have more technology, and this tech can have higher replacement part costs, require special mechanics and demand more labor time. However, if your new car has additional safety features, cheaper parts or is driven by a low-risk driver, it may be less expensive to insure than your older-year car.

In addition to model year, engine size and horsepower also plays a role. If you know a vehicle’s make and model, you may be able to better gauge what car insurance premiums you will see.

Car model Average annual full coverage premium
BMW 330i $2,513
Dodge Charger $ 2,824
Ford-150 $1,753
Honda CRV $1,635
Honda Odyssey $1,735
Jeep Wrangler $1,820
Subaru Outback $1,603
Toyota Prius $2,117

Ways to lower your insurance premium

Understanding your rate factors may help you bring down your cost of car insurance. However, there may be other ways to lower your car insurance premium and save money on your policy:

  • Ask about discounts: Most insurance companies offer many types of car insurance discounts for things like claims-free, loyalty and pay-in-full.
  • Bundle your insurance: When you bundle your home and auto insurance policy with the same company, you can typically earn cheaper premiums on both. You may be able to bundle other types of insurance with your auto policy, like condo, renters, boat, life or motorcycle insurance.
  • Opt for a higher deductible: When you select a higher deductible, you are assuming more of the financial risk, which allows insurance companies to offer you a lower rate. However, speak with your insurance agent to ensure the higher deductible is worth the decrease and that you aren’t putting yourself in a financially uncomfortable position if you were to have a loss.
  • Consider claims carefully: Your car insurance contract or state may require you to report accidents, but this usually doesn’t apply to comprehensive losses. Having several small comprehensive claims can increase the cost of your policy, so paying out-of-pocket for smaller, insignificant claims may help you get cheaper car insurance.
  • Add safety features: If your car does not have adaptive headlights, anti-theft devices, blind spot detection, rear-view cameras or anti-lock brakes, you could consider installing them to earn savings. Many insurers offer discounts for safety features, but contact your insurance agent to get a quote on how this could save you before committing to expensive upgrades.
  • Shop around: It might pay to shop around for car insurance at least once a year to ensure you are paying the best price for your coverage. You may find that you can get better rates by switching carriers, which might be useful information to have before your policy renewal date.

Frequently asked questions

    • Carrying only the state minimum required liability limits may result in the cheapest car insurance premiums, but the true cost may put you at a major financial risk. If you are involved in an at-fault accident and the costs are higher than your car insurance limits, you’d be responsible for paying the excess out of pocket. This is more likely to happen when having lower insurance limits. Having a policy with higher liability limits, along with optional coverage, like collision and comprehensive, may be more expensive up front, but it may save you more in the long run.
    • Annual mileage is another rating factor used by most insurance companies. If you use your car to commute to work or school, how many days a week and how many miles one way are common questions insurers use to determine your annual mileage. Drivers who use their cars less may be able to qualify for low-mileage or reduced use discounts if they meet certain thresholds of eligibility.
    • Since most insurance companies require spouses and other licensed household members to be included in your car insurance policy,  marriage could impact your rates. However, whether your premium increases or decreases is largely dependent on your unique situation. If your spouse has multiple moving violations on their record or drives a higher-risk vehicle, you may see your rates increase. Some insurers do offer savings that married policyholders may be able to benefit from, such as multi-car discounts for insuring more than one vehicle.
    • When you have been convicted of a moving violation, the increase in your premium may be significant depending on the severity of the infraction. Not only may a surcharge apply to your premium, but you might lose existing good driving discounts. Generally, a speeding ticket or accident will stay on your record from three to five years, whereas a DUI may stay on your record five to 10 years or permanently. However, the length of time a poor driving record will impact your premium depends on both your state’s department of motor vehicle laws and your insurance company.
    • Your education level is one of the factors that impacts car insurance rates with some carriers. The higher your education level, the less you typically pay for auto insurance. However, the cost difference can vary by carrier. Rating formulas are proprietary, so it may be difficult to determine which companies use education to determine premiums. If a company does not ask about education, it may not factor it into your final cost. Getting several quotes from different carriers may help you find the best price for your coverage needs and driving profile.
  • Bankrate utilizes Quadrant Information Services to analyze 2023 rates for ZIP codes and carriers in all 50 states and Washington, D.C. Rates are weighted based on the population density in each geographic region. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:

    • $100,000 bodily injury liability per person
    • $300,000 bodily injury liability per accident
    • $50,000 property damage liability per accident
    • $100,000 uninsured motorist bodily injury per person
    • $300,000 uninsured motorist bodily injury per accident
    • $500 collision deductible
    • $500 comprehensive deductible

    To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2021 Toyota Camry, commute five days a week and drive 12,000 miles annually.

    These are sample rates and should only be used for comparative purposes.

    Credit-based insurance scores: Rates were calculated based on the following insurance credit tiers assigned to our drivers: “poor, average, good (base) and excellent.” Insurance credit tiers factor in your official credit scores but are not dependent on that variable alone. Four states prohibit or limit the use of credit-based insurance scores as a rating factor in determining auto insurance rates: California, Hawaii, Massachusetts and Michigan.

    Incident: Rates were calculated by evaluating our base profile with the following incidents applied: clean record (base), at-fault accident, single speeding ticket and single DUI conviction.

    Model: To determine cost by vehicle type, we evaluated our base profile with the following vehicles applied: BMW 330i, Dodge Charger, Ford F-150, Honda CRV, Honda Odyssey, Toyota Prius, Jeep Wrangler, Subaru Outback and Toyota Camry (base).

    Age: Rates were calculated by evaluating our base profile with the ages 18-60 (base: 40 years) applied. Depending on age, drivers may be a renter or homeowner. Age is not a contributing rating factor in Hawaii and Massachusetts due to state regulations.

    Gender: The following states do not use gender as a determining factor in calculating premiums: California, Hawaii, Massachusetts, Michigan, North Carolina, Pennsylvania.

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