For most drivers, car insurance is a mandatory state requirement, but the price you pay for your car insurance can be different for everyone. Car insurance companies use several factors to calculate the cost of car insurance. Things like your age, gender, state of residence, and driving record often play a role in the calculation of your car insurance rates, although some states have banned certain factors that are unrelated to your driving history.
Before you buy or renew your auto insurance policy, it is good to know what factors influence insurance rates so you can find the best car insurance rates for your household.
What factors affect car insurance rates?
When purchasing car insurance, your insurer will need to know several pieces of information to quote you a premium. You can usually prepare details about yourself, your vehicle and your insurance history ahead of time to make your process of shopping around easier.
Your credit score is important for more than just a car loan – it is also a determining factor when you apply for car insurance.
However, there are some states that do not allow the use of your credit score when calculating car insurance rates, including California, Hawaii, Massachusetts, Michigan and Washington.
If you are wondering why your credit score is so important, it is used to help predict future behavior. “Credit has been used in the insurance industry since the 90s to help carriers assess the risk of claims being filed,” says Cynthia Moore of Salzburg Insurance in Norfolk, VA. She explained that based on research conducted, people with a lower credit score are statistically more likely to file more claims than those with a higher credit score. Because of this, insurers may factor in the added risk by setting a higher premium.
Average annual car insurance premiums by credit rating
Every aspect of your location plays a role in determining your premium amount in most states, from your state to your city and even down to your ZIP code. John Espenschied of Insurance Brokers Group, LLC, tells us that the state where your vehicle is parked or garaged is a huge factor. “Rates by states can vary by as much as 400%, with Louisiana being one of the highest in the nation,” he warns. “Twelve states require personal injury protection (PIP) coverage, which significantly boosts the cost of car insurance,” Espenschied explains. “These states are known as no-fault states and require your insurance company to pay for your bodily injury if you are involved in an accident regardless of fault.”
According to Moore, your garaging ZIP code provides details of population size, which can impact the likelihood of thefts and accidents. Although 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 factors.
Those who live in severe weather areas may also face higher premiums due to related causes of loss. For example, the NICB reports that more than 422,000 insured vehicles were damaged by Hurricane Harvey, about 300,000 claims after Hurricane Katrina, and 250,500 claims following Superstorm Sandy.
|State||Average annual full coverage premium||Averagae annual minimum coverage premium|
|District of Columbia||$1,855||$704|
Your insurance history affects your car insurance rates in two separate ways. Prior insurance shows that you have continually maintained insurance – which is required by every state but New Hampshire, according to Espenschied of Insurance Brokers Group. “People who drive with no insurance and then decide to buy insurance have a much higher likelihood of canceling, especially if purchased simply to renew license plates or go to court to show proof of insurance,” he explains. However, if you have five or more years with one insurance company, Espenschied says it will typically qualify you for better rates. “It shows longevity and willingness to keep insurance year after year.”
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.
Even with a long insurance history, careless driving habits can negatively impact your premiums. Having incidents on your driving record could lead to insurers viewing you as high-risk and charging higher rates. Comparatively, those with clean driving records may more easily find cheaper rates and qualify for additional savings, such as safe driver and claims-free discounts.
|Average annual full coverage premium|
|Clean driving record||$1,674|
Age and gender
During your lifetime as a driver, your rates will go up, come down and go back up – based solely on your age. Teen drivers have four times as many crashes as drivers who are 20 or older, according to the IIHS. This is often a result of inexperience and risky habits. At the other end of the spectrum, the Institute reports that 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 many states, and young men are less likely to wear seatbelts, and more likely to buy faster vehicles and speed.
“Men typically have higher premiums than women, especially in the under 25 category,” says Moore of Salzburg Insurance. “Rates stay level between 30-65 and then, with most carriers, you will start to see an increase in rates for drivers over 65, and especially over 75.” When asked why, Moore explained that studies show older drivers have a slower reaction time and decreased vision, causing more claims.
The following states do not use gender as a determining factor in calculating premiums: California, Hawaii, Massachusetts, Michigan, Montana, North Carolina and Pennsylvania.
You would probably expect a new vehicle to cost more to insure than an older one, but it is not always that simple. Newer cars are typically more expensive to insure due to having new parts. However, if your new car qualifies for additional savings, like for having safety features, it may be less expensive to insure than an older-year car.
In addition to newness, size 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||Average annual minimum coverage premium|
|Dodge Grand Caravan||$1,623||$503|
|Dodge Ram 1500||$1,697||$527|
|GMC Sierra 1500||$1,555||$503|
|Jeep Grand Cherokee||$1,531||$516|
|KIA Forte LX||$1,682||$544|
Ways to lower your insurance premium
Despite rate factors, there are other ways to lower your car insurance premium and save money on your policy.
- Ask about discounts: Several 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 earn cheaper premiums on both. You could also bundle other types of insurance, like condo, boat, life, and health insurance.
- Opt for a higher deductible: Drew Scott, senior vice president of Scott Insurance in Stratford, CT, says this can be a helpful approach, but to see significant savings, you might want to opt for a higher deductible for several vehicles. Keep in mind that although your monthly payment will be lower, you will have a higher out-of-pocket expense if you are in an accident.
- Reconsider your claims: Espenschied advises against filing or contacting your insurer about insignificant, small claims. Even if no money is paid out, Espenschied says all claims – even zero pay-out claims – cost time, money, and energy to investigate.
- File with the other driver’s insurance: If someone dings your car, Espenschied recommends trying to file a claim with their insurance company before attempting to contact your company. “Chances are, the other party will be willing to pay you directly for a small claim so that they don’t have to have it on their record at renewal time.”
- 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 having them installed to earn savings. Many insurers offer discounts for safety features. Additionally, the added security could reduce your chances of an accident.
- Shop around: Whether you have a policy currently in action or are coming up on the end of your policy period, it could 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
How does carrying higher state minimum liability limits affect car insurance rates?
Although carrying the state minimum requirement for car insurance is the cheapest option, it could also pay to have higher insurance limits. For instance, if you are in an accident in which the expense outweighs your liability-only coverage, you would end up paying more out of pocket than you might if you got into a covered accident with collision and comprehensive coverage.
Can your annual mileage make a difference in car insurance rates?
How frequently you drive as well as the mileage you put on your vehicle in a given time span may impact your car insurance rates. Drivers who use their car less may be able to qualify for low-mileage or reduced use discounts if they meet certain thresholds of eligibility.
How does marriage affect car insurance premiums?
Because you will likely add your spouse to your policy once you are married, marriage could impact your rates. Although whether your premium increases or decreases is largely dependent on your unique situation, 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.
Bankrate utilizes Quadrant Information Services to analyze 2021 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. 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 2019 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: 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. The following states do not allow credit to be a factor in determining auto insurance rates: California, Hawaii, Massachusetts, Michigan, Washington.
Incident: Rates were calculated by evaluating our base profile with the following incidents applied: clean record (base), at-fault accident, single speeding ticket, single DUI conviction and lapse in coverage.
Mileage: Rates were calculated by evaluating our base profile with the following differences in mileage: 2k, 5k, 12k (base), 15k and 20k.
Model: To determine cost by vehicle type, we evaluated our base profile with the following vehicles applied: BMW 330i, Ford F-150, Honda Odyssey, Toyota Prius and Toyota Camry (base). For new vs used vehicles, we also included the following years in our calculations: 2016, 2017, 2018, 2019 (base) and 2020.
Status: Rates were evaluated based on the following marital/family status: single (base), married, 40 year married man and woman with a 16-year-old teen driver.
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. Hawaii rates indicate age is not a contributing factor.
Gender: The following states do not use gender as a determining factor in calculating premiums: California, Hawaii, Massachusetts, Michigan, Montana, North Carolina, Pennsylvania.
Teens: Rates were determined by adding a 16- or 17-year-old teen to a 40-year-old married couple’s policy. The rates displayed reflect the added cost to the parents’ policy.