Insurance » Auto Insurance » 11 Things That Affect Your Car Insurance Rates
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11 Things That Affect Your Car Insurance Rates

While you have no control over some factors that affect your car insurance rate, there definitely are a few things you can work with - here's how it works.
Author: Jack Wickens
Jack Wickens

Writer, Contributor


Jack is a personal finance writer who has been writing for more than a decade. His passion for educating consumers and helping everyday families earn more and live better. He is most knowledgeable with years of experience covering topics such as savings, budgeting, and responsible credit use and always happy to share his expertise with readers.

Review & Fact Check: Baruch Mann (Silvermann)

Jack Wickens

Writer, Contributor


Jack is a personal finance writer who has been writing for more than a decade. His passion for educating consumers and helping everyday families earn more and live better. He is most knowledgeable with years of experience covering topics such as savings, budgeting, and responsible credit use and always happy to share his expertise with readers.
Author: Jack Wickens
Jack Wickens

Writer, Contributor


Jack is a personal finance writer who has been writing for more than a decade. His passion for educating consumers and helping everyday families earn more and live better. He is most knowledgeable with years of experience covering topics such as savings, budgeting, and responsible credit use and always happy to share his expertise with readers.

Review & Fact Check: Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Financial Expert, The Smart Investor CEO


Baruch Mann (Silvermann) is a financial expert and founder of The Smart Investor. Above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.

You can trust the integrity of our unbiased, independent editorial staff. We may, however, receive compensation from the issuers of some products mentioned in this article. See how we make money.

Table Of Content

When you look at the prices of car insurance it can be very tempting to choose a higher deductible or even reduce your coverage in order to lower your rates.

These are two of the things that most clearly reduce your costs, after all. But actually, these aren’t the only things that are affecting your cost. There are a number of different factors that you can and should be paying attention to.

While not everything is something you have control over, there definitely are a few things you can work with. And even just knowing what’s going into your insurance rate can be a big help.

1. Location

First on the list is your area, which includes your state and your specific zip code. That’s because each state has different regulations when it comes to car insurance, and you may need something specific as a result.

Typically, the states with the most inexpensive car insurance rates have lower population densities and less costly lawsuits and accidents. This chart showing The Zebra data on the average annual premium costs, shows that the state of Maine offers the least costly car insurance. This is closely followed by North Carolina and Virginia.

However, there is only a 25% difference in cost between Maine and the 10th least expensive state, Indiana. This is a different trend compared to the most expensive car insurance states, where the cost can be significantly different.

10 Most Inexpensive States for Car Insurance in 2020

For those who live in dense, urban areas car accidents are more common, which means insurance claims are more common. As a result, you’re going to have a higher cost for your insurance compared to someone who lives in a more rural area.

Your specific zip code reflects claims for things like stolen cars, vandalism, the commonality of claims and weather patterns. All of these things also help to create your risk level, which could result in a higher cost.

Now, it’s important to know if your state allows an insurance company to use your location as a factor because not all states do.

If you live in California your location is required to be counted only after your driving record, miles driven and how many years you’ve been driving.

2. Your Coverage

The specific coverage that you choose is going to be another important factor.

While your state is going to require you to have some specific types of coverage, you’re going to have the final say on some additional coverage.

If you’re only going with the minimum you’re going to pay less. If you’re going with higher limits of liability or if you want to add on collision or comprehensive coverage you’re generally going to pay more.

Keep in mind that you’re trading off lower costs for more protection in case of an accident. If you keep your costs low you could be paying a whole lot more if you end up in an accident and don’t have the right type of coverage to help.

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3. Deductible Amount

When you need repairs on your vehicle you have to pay a portion of the costs before your insurance covers anything. This is the deductible amount.

You can generally choose from several different options when it comes to the deductible.

If you choose a low one, like $100, you’re going to pay a whole lot more in premiums in exchange for paying less if you run into a problem.

If you choose a high deductible, like $1,000, you’re going to pay lower premiums in exchange for paying more if you run into a problem.

4. Your Credit Score

Just about every car insurance company uses your credit score when they’re deciding just what your rate is going to be.

If you have a lower credit score you’re likely going to pay even more on your premium (except in states that prohibit this). If you have a higher credit score you’re considered a lower risk, which means you don’t have to pay as high of a premium.

That’s because those with low credit scores are considered to file more claims.

Your credit score can play a crucial role in the cost of your auto insurance. This chart created using data from The Zebra highlights the dramatic difference in the average cost of auto insurance between good and bad credit.

Whether you are looking for minimum or full coverage, the chart shows that you can expect to pay almost double the rate if you have bad credit, compared to good credit.

Average Auto Insurance Rates For Good and Bad Credit

Now, if your credit score is allowed to be counted as part of your premium valuation you can actually increase your costs substantially.

Overall, the research seems to suggest that those who have fair credit can have a rate that’s as much as 17% higher than those who have good credit.

If you have poor credit it can actually be as much as 67% higher than someone with good credit.

5. Your Driving Record

It shouldn’t come as any surprise that the way you drive your car and how many accidents or tickets you’ve had in the past affects your premium when it comes to your car insurance.

The last 3-5 years count for the most, but keep in mind that a company could go back even further than that. If you haven’t had a ticket or accident in that time you’re considered a lower risk and you could end up with lower rates.

For those who have had a ticket or accident (or more than one) your rates could increase substantially.

Over a million drivers are arrested for a DUI each year in the US. This offense not only carries fines and other penalties, but it also impacts the cost of car insurance. In this chart using The Zebra data, you can see the cost of car insurance almost doubles after a DUI for both minimum coverage and full coverage. This means that you can expect to pay an average of over $3,100 compared to approximately $1,600 if you had a clean driving record.

How Much a DUI Raises Average Car Insurance Costs (1)

Keep in mind that while all claims are going to count against you, at-fault claims are going to increase your rates even more than comprehensive claims.

You want to be as safe of a driver as you can be to make sure that you’re not making claims against your insurance.

The more claims you make the higher risk you’re considered to be.

Even if each of those claims is minor or if you’re not at fault. That’s because you’re still seen as a risk by the car insurance company and you could end up paying as a result.

6. Your Car

The specific car that you drive is another factor that impacts how much you pay.

After all, some vehicles are going to be more expensive all around or they might be more likely to be stolen or broken into.

If you have a larger vehicle it’s generally going to be safer than a small car, which means you can get a better premium because of the safety rating on your vehicle.

But if you have an old vehicle you could end up paying more for repairs over time.

That means you could end up with a higher premium because you’re paying for the fact that you could need those repairs and you could make a claim to your insurance company to pay for them.

If you have a vehicle with higher ratings it also means that people in your vehicle are less likely to be injured.

As a result, you’re going to have a lower premium again because your insurance company is less likely to have to pay out for medical expenses.

If you don’t have a good safety rating on your vehicle, however, you could end up paying a whole lot more. And that goes up even higher if you’re on the list of top 10 most stolen vehicles

7. Your Gender

Though 6 states don’t allow your gender to be counted as a factor when it comes to assessing your insurance premium, there are many states that do.

This means your propensity for getting into an accident could be decided based on your gender.

Research and statistics show that men tend to have more accidents than women.

And younger men are even worse for this. They’re also more likely to drive more, to take bigger risks, to drive intoxicated more, speed and to skip out on their seat belt.

In fact, according to the IIHS crashes that men are involved intend to be even more dangerous than those that women are involved in.

Now, not all women are going to receive lower rates. After all, there are some differences as men and women get older.

Once you reach the 30 year age bracket risks actually start to become more balanced and this means that some men may actually see a drop below the rate of a woman.

But if you’re getting into the 60 year age bracket that actually starts to reverse yet again.

8. Car Usage

Drivers who don’t travel as much and put fewer miles on their vehicles are going to pay less than someone who drives extensively.

After all, if you’re driving your car more you’re more likely to get into an accident than someone who rarely drives. You want to make sure that when you report your yearly driving it’s as close to the real numbers as possible.

Estimating way too low (or fudging your numbers on purpose) could get you in trouble with the insurance company. Estimating too high could cost you a whole lot more than you think.

Now, if you’re driving to and from a job this is also going to affect the amount that you pay for insurance. That’s because you’re driving more and you’re driving at busy times of the day.

Using other methods of transportation for work commutes can help you out when it comes to lowering your insurance premium, but it’s only a small part of the process.

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9. Your Loyalty

If you already have an insurance plan with a specific company you may want to watch out.

Some insurance companies run an algorithm on you to decide if you’re likely to shop around on them.

If they think you are then they might leave your rate alone. If they think you’re not, however, they might raise your rate and assume you won’t notice or you won’t do anything about it. That’s going to cost you a whole lot of money in the long run.

In fact, if you think this isn’t happening, research suggests that as many as 63% of insurance companies do this or they plan to start doing it soon.

And that number goes up for the insurance companies that are actually making the most and working with even more people. The more money they take in, the more likely they are to use this practice.

10. Your Grades

If you’re still in school you could actually be eligible for a discount.

You want to make sure that you’re looking for any opportunities that you have to get discounted rates and that you’re looking into what’s offered.

Your insurance company isn’t likely to say anything about it, but you don’t want to pay more than you have to.

The idea is that people with better grades are more attentive and therefore less likely to get into a car accident.

As a result, you’re going to get a little bit of a bonus for being considered a lower risk driver and you don’t really care what it means to the insurance company.

Generally, you’re going to need at least a 3.5 GPA in order to be considered for this type of discount.

You would need to have all A’s and B’s in order to achieve this grade point average and it could apply to those who are in high school or those who are in college.

11. Your Job

Did you know that your insurance can actually be based on the type of work that you do? Well, it can because different careers are considered higher risk for your car insurance as well as health insurance.

Car insurance companies are looking at different types of behaviors that seem more common or prevalent among individuals in certain careers.

It’s also about where you work and when you’re driving there and back.

If you use your vehicle for work purposes this is also going to increase your rates because you’re driving more.

You want to make sure that you report whether you’re using your car for work driving because if you do, but don’t report it, your insurance company may not payout if you’re involved in an accident or if your vehicle needs more repairs because of the heavy driving.

Who Really Has the Cheapest Car Insurance?

For drivers who do not meet USAA‘s membership standards, Geico and State Farm have the cheapest vehicle insurance, according to our analysis. Also Progressive, Nationwide and Erie Insurance considered cheap, depends on the specific insurance you would like to get.

Insurers, on the other hand, utilize diverse approaches to determine a reasonable rate based on several characteristics when determining auto insurance rates to charge car owners. Credit score, vehicle model, type of coverage, driving record, driver demographics, and other factors are used by auto insurance providers to explain their figures.

Furthermore, because many insurance firms offer rate discounts and programs for certain scenarios, the cheapest car insurance for one driver may not be the cheapest for another.

Are you a first-time driver or a teen? Are you a senior citizen? Are you now serving in the military (or have you previously served)? What kind of driving record do you have? Do you want bodily injury and property damage liability coverage in your automobile insurance policy? What about towing, accident forgiveness, and uninsured motorist protection? The answers to these questions will determine which insurance company can give you with the best and most affordable auto insurance quote. As a result, getting the cheapest vehicle insurance rates is difficult without first going through the insurance approval procedure to see if you fulfill the insurer's requirements.

You can also lower your auto insurance costs by agreeing to pay a greater deductible. If you have a shorter commute to and from work, look for pay-per-mile coverage to save money based on the number of miles you drive each year.

Keep in mind that different auto insurers charge varying prices for the same sort of coverage, and you may be able to save money on your car insurance. Compare insurance quotes to see where you can receive the most benefits and savings while still getting adequate coverage for each insured hazard.

Does Car Insurance Cost More if you are Retired?

Insurers utilize age as one of the elements in determining possible risk. New drivers can expect to pay astronomically expensive insurance premiums. These should gradually decrease until the driver reaches the age of 30. Insurance prices are usually stable between the ages of 30 and 65. The rates, however, begin to rise again at this time.

Age is one of the most significant factors in the cost of auto insurance. As drivers gain experience, insurance rates typically drop, as older drivers are less likely to be involved in an accident or commit a driving violation.

This chart with data from The Zebra shows the average car insurance rates by age group. It highlights that 16 to 19 year olds can expect to pay more than double their 20 to 29 counterparts. It also shows that rates decrease until the 60+ age groups. This is typically because older drivers are more likely to have slower reactions that could lead to an accident and may suffer more serious injuries in a mild to serious accident that is reflected in the insurance rates.

Average 6 Month Car Insurance Rates by Age Group

Teenage drivers are three times more likely to be involved in a crash than their 20-year-old colleagues, according to statistics. As a result, they have the highest insurance premiums of any age group.

Seniors do not have the cheapest insurance rates, despite the fact that teen drivers often pay the highest. A seniors policy, on the other hand, can help you keep your insurance expenses in check. These plans are offered by specialist insurers who calculate rates based on factors other than age.

Car insurance for seniors differs from conventional insurance coverage in that it offers reductions based on age. As with regular policies, the cost of this sort of insurance is determined by a variety of factors, including:

  • Amount that can be deducted
  • Coverage types
  • Your record as a driver
  • Location

Additional benefits may be included with the coverage, like as roadside assistance, household support for automobile accident injuries, or AARP membership.

Other small variations, such as the ability to print larger documents or the availability of additional support helplines, may exist.

Seniors who finish a driver's education course or install extra safety measures in their car may be eligible for additional rewards from their insurer.

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