25 Key Factors That Can Affect Your Car Insurance Rate

You can’t control every factor that affects your car insurance rate. Shopping around will find you the best price.

Lisa GreenApr 27, 2021
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The factors that affect your car insurance rates can seem like a complete mystery. Some of them are outside your control, like your age. But others are within your grasp, like paying your bills on time, driving safely and shopping around for the cheapest rates — and they can save you hundreds of dollars a year.

Here are 25 factors that can affect what you pay for car insurance. (Some states ban the use of one or more of these factors in insurance pricing, so they may not all apply where you live.)

Your personal characteristics

1. Your age

Young, inexperienced drivers are more likely than older drivers to have accidents. As a result, insurance companies generally charge higher rates for drivers younger than 25. Premiums start to creep up again for drivers age 65 and older, according to NerdWallet’s most recent rate analysis.

2. Your gender

In most states, insurers can charge different rates for male and female drivers. This often means rates for men are higher when they’re young, and rates for women are higher when they’re older. A handful of states won’t allow insurers to differentiate by gender.

3. Your marital status

Most large auto insurance companies have lower rates for married drivers than for those who are single, separated, divorced or widowed, research by the Consumer Federation of America shows.

4. Your education

Drivers with college degrees generally pay less for car insurance. Insurers say highly educated people tend to file fewer claims. However, using education levels in setting prices has come under fire in recent years, and some states are moving away from allowing this practice.

Where you live, what you do and your finances

5. Your address

Location is one of the primary factors affecting car insurance rates. Average premiums vary dramatically by state, because each state has different regulations. Average rates in Michigan and Louisiana, for example, can be more than twice the average rates in Ohio and Maine. Rates also vary significantly by ZIP code and neighborhood. Rural drivers pay less than those in cities, where vandalism, theft and crashes are more common, according to the Insurance Information Institute.

6. Your job

Drivers with certain occupations pay higher rates because they’re more likely than others to file insurance claims, according to some insurers. But consumer advocates have challenged the use of occupation in setting car insurance rates. Some states have banned it or are considering a ban.

7. Your credit history

Whether you pay your bills on time can be a huge factor affecting your car insurance rates. In many states, insurance companies use credit-based insurance scores, which are different from your regular insurance score, to set prices. Your regular credit score is typically a good indicator of your credit-based insurance score.

On average, a 40-year-old driver with poor credit, as reported to the insurer, pays almost twice as much for car insurance as an equivalent driver with good credit, a NerdWallet analysis found. Statistics show that people with poor credit tend to file more claims, the Insurance Information Institute says.

California, Hawaii, Massachusetts, Michigan and Washington don’t allow insurers to use credit when determining car insurance rates.

Below are the average annual costs of full and minimum coverage for drivers with poor credit.

Driver age

Full coverage

Minimum coverage

25

$3,373

$1,164

40

$2,812

$984

8. Whether you own a home

Some companies give homeowners a price break on car insurance, even if they don’t buy homeowners coverage through the same insurer. Many offer discounts if you bundle multiple policies, such as homeowners and auto insurance, with the same company.

Where and how you drive

9. Your driving record

If you’ve had accidents, traffic tickets or violations like a DUI, you’ll probably pay more for car insurance than a driver with a clean record. For example, a 40-year-old driver with a DUI on their record would pay nearly twice as much for minimum coverage as a similar driver with a clean record, NerdWallet’s analysis found. In some cases you might need a company that specializes in insuring high-risk drivers.

10. How much you drive

Low-mileage drivers often get cheaper car insurance, because less time on the road means fewer opportunities for an accident. Low-mileage drivers may also save by choosing pay-per-mile insurance, which tracks how many miles they drive to set premiums.

11. Where you park your car

Keeping your car in a garage is less risky than parking it on the street, and your insurance rates may reflect this, according to the Insurance Information Institute.

12. Your years of driving experience

If you started driving at 23, you’ll probably pay more for car insurance at 25 than someone your age who’s been driving since 16. Your rates are likely to decline as you get more experience behind the wheel.

13. Auto insurance claims you’ve made

When your insurance company pays an accident claim on your behalf, you may see higher rates at your next policy renewal. On average, drivers with a recent at-fault accident pay over 50% more for full coverage than those with a clean record, according to our analysis. Some insurers offer accident forgiveness, promising not to raise your premiums because of an at-fault crash, but adding that feature to your policy may cost extra.

14. Questions you’ve asked your insurance agent

Merely asking your insurance agent about a possible claim can affect your rates, even if you decide not to file. Such inquiries, especially if you tell the agent about damage, could be recorded in a database that many insurers use when evaluating risk. That might count against you when you shop for new insurance. If you’re simply wondering whether the repair costs exceed your deductible, it’s better to check your coverage information on the declarations page of your auto policy.

Your vehicle

15. The type of car you drive

Your rates are based in part on the claims your insurer has seen from other people who drive the same model as the car you’re insuring. Sports cars often have high insurance rates, for example, in part because insurers are more likely to pay out large claims from speeding drivers. Insurance companies also consider factors like how much a vehicle will cost to repair, how popular it is with car thieves and how much it’s likely to damage another car in an accident, according to the Insurance Information Institute.

16. The trim level of your car

Vehicles with extra features like lane sensors, backup cameras and high-end audio can cost more to repair — and therefore more to insure — than base models of the same vehicle. Moving to a higher trim level typically raises not just the price of the car but also the insurance premium.

17. The safety features of your car

Vehicles with a strong safety record and good safety equipment often qualify for discounts, the Insurance Information Institute says. On the other hand, some safety features can lead to higher premiums, because high-tech safety equipment can be expensive to repair or replace after an accident.

18. Whether you own, finance or lease

Insuring a leased or financed car may cost more than coverage for one you own outright, simply because the lender may insist you buy more coverage types than you would have chosen. To protect their interests, lenders typically require collision and comprehensive coverage. They may also ask you to maintain a low deductible or to get gap insurance to pay the difference between the car’s value and the amount you owe on the lease or loan.

Your car insurance choices

19. The insurance company you choose

You can make a huge difference in your car insurance rates by picking the cheapest insurer available in your area. We found average rates were more than twice as high for the priciest company compared with the cheapest insurer in each state for a 40-year-old good driver buying full coverage. And the cheapest company in one state can be the most expensive in another. That’s why it’s imperative to shop around and compare car insurance quotes to locate the best rates for you.

20. Your previous insurance

If you’re switching from a nonstandard insurer, one that mainly covers high-risk drivers, you may pay more than a driver switching from a mainstream insurance company. Some large insurers charge higher rates to drivers who were previously covered by a nonstandard insurer, Consumer Federation of America research found. If you’re upgrading from minimum required coverage to a policy with higher liability limits, you may pay more for the same coverage than other customers, according to another study by the CFA.

21. Your insurance lapses

Failing to pay your car insurance bill or canceling your policy because you’re between vehicles can cost you. Coverage gaps can make you seem like a higher risk in the eyes of insurance companies, and they’ll often raise your rates in response — or even deny you coverage altogether. To avoid this, consider pausing or reducing your coverage if your current premium is unaffordable.

22. The coverage you choose

It’s no surprise that the more coverage you get, the more it will cost. We found that full coverage auto insurance costs more than twice as much, on average, as having the minimum required liability coverage only. A full-coverage policy includes collision and comprehensive coverage, which will pay to fix or replace your car if you collide with other vehicles, animals or objects or if it’s stolen. Add-ons like new car replacement coverage can boost the price, but the benefits may be worth it to you.

23. The deductible you choose

Your deductible on collision and comprehensive insurance is the amount the carrier subtracts from a claim. For example, if car repairs cost $3,000 and your deductible is $500, the insurer will pay $2,500. Your insurance premiums will be lower if you choose a higher deductible, like $1,000, but the payout will be lower if you have an accident. Deductibles don’t apply to liability claims.

24. Your loyalty to your insurance company

You might expect your car insurance company to reward your years of loyalty with discounts, and some do. But some insurers try to predict which customers are the least likely to switch insurers and squeeze more profit from them through rate increases. Many states have banned this practice, called price optimization. It’s a good idea to compare car insurance rates to make sure your loyalty isn’t costing you.

25. The discounts you ask for

Don’t assume your insurance company automatically applies all the discounts for which you’re eligible. For example, your insurer won’t know your teen is getting good grades unless you provide proof and ask for a good student discount. Insurance companies have tons of discounts, and you may save money by reviewing them with your agent on a regular basis.

How to lower your rates

Shopping around is essential to find the lowest car insurance rates for you. Many factors affect an insurance quote, and each company calculates the factors’ relative importance differently. So the cheapest insurer for your neighbor likely won’t be the cheapest for you.

Unless you compare prices, you won’t know which company will offer someone in your situation the best rate. NerdWallet’s car insurance comparison tool can help.

More tips:

  • Drive carefully. Your rates will be lower if you keep your record clear of accidents, speeding tickets and other violations.

  • Pay bills on time. In most states, having a good credit history can save you hundreds of dollars a year on car insurance compared to a driver with poor credit.

  • Choose your vehicle thoughtfully. When you buy a car, the sticker price and monthly payments aren’t the only costs to think about. Some models can be much less expensive to insure than others, so check rates before you buy.

  • Consider a higher deductible. If you can afford to pay a bit more out of your pocket after a claim, opting for a higher deductible will reduce your insurance rates. Then, if you don’t make a claim, you’re certain to come out ahead.

  • Ask for discounts. You might save money because of organizations you belong to, equipment on your car, setting up automatic payments or dozens of other factors.

Frequently asked questions

Although dozens of factors go into your final insurance premium, these are among the most important:

  • Your driving history.

  • Your age.

  • Where you live.

  • Your credit history (in most states).

  • The car you drive.

  • The coverage and deductibles you choose.

Auto insurance premiums are determined by factors you can control — such as where you live, the type of car you drive and how much coverage you buy — and those you can’t, such as your age. Poor credit can significantly raise your rates in many states, as can accidents or DUI violations.

Shopping around for car insurance quotes every year is the best way to make sure you’re paying as little as possible. Raising your deductible, bundling multiple policies with the same insurer, asking about discounts and (in some states) improving your credit are other effective ways to reduce your auto insurance rates.

Methodology

NerdWallet averaged rates based on public filings obtained by pricing analytics company Quadrant Information Services. We examined rates for 40-year-old men and women for all ZIP codes in any of the 50 states and Washington, D.C. Although it’s one of the largest insurers in the country, Liberty Mutual is not included in our rates analysis due to a lack of publicly available information.

In our analysis, “good drivers” had no moving violations on record; a “good driving” discount was included for this profile. Our “good” and “poor” credit rates are based on credit score approximations and do not account for proprietary scoring criteria used by insurance providers. These are average rates, and your rate will vary based on your personal details, state and insurance provider.

Sample drivers had the following coverage limits:

  • $100,000 bodily injury liability coverage per person.

  • $300,000 bodily injury liability coverage per crash.

  • $50,000 property damage liability coverage per crash.

  • $100,000 uninsured motorist bodily injury coverage per person.

  • $300,000 uninsured motorist bodily injury coverage per crash.

  • Collision coverage with $1,000 deductible.

  • Comprehensive coverage with $1,000 deductible.

In states where required, minimum additional coverages were added. We used the same assumptions for all other driver profiles, with the following exceptions:

  • For drivers with minimum coverage, we adjusted the numbers above to reflect only the minimum coverage required by law in the state.

  • We changed the credit tier from “good” to “poor” as reported to the insurer to see rates for drivers with poor credit. In states where credit isn’t taken into account, we only used rates for “good” credit.

  • For drivers with one at-fault crash, we added a single at-fault crash costing $10,000 in property damage.

  • For drivers with a DUI, we added a single drunken driving violation.

We used a 2018 Toyota Camry LE in all cases and assumed 12,000 annual miles driven.