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25 Key Factors That Can Affect Your Car Insurance Rate

You can’t control every factor that affects your car insurance rate, but shopping around will help you find the best price.
June 25, 2019
Auto Insurance, Insurance
Surprising Factors Affect Car Insurance Rates
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The factors that affect your car insurance rates can seem to be a complete mystery. Different insurance companies give you wildly different quotes. Even though they may consider the same factors when setting prices, companies use their own data and formulas to assess the risk you pose. What’s more, your premiums may be affected by factors you can’t control and might not even know about.

But some of the factors are under your control. Smart choices like paying your bills on time, driving safely and shopping around for the cheapest rates can save you hundreds of dollars a year on auto insurance.

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

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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.

» MORE: Find the cheapest car insurance for teens

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.

» MORE: What you can do about gender-based rate hikes for car insurance

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. Car insurance rates vary dramatically by state, because each state has different regulations. Average rates in Michigan and Louisiana, for example, can be more than four times the average rates in North Carolina 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 bigger risks, according to the Insurance Information Institute.

» MORE: Find the cheapest car insurance in your state

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 have a huge effect on your car insurance rates. In many states, insurance companies use insurance scores, similar to credit scores and based on information in your credit report, to set prices. On average, a 40-year-old driver with poor credit, as reported to the insurer, pays almost twice as much for a full coverage policy as an equivalent driver with good credit, a NerdWallet analysis found. Statistics show people with poor credit tend to file more and more expensive claims, the Insurance Information Institute says. However, some states ban the use of credit in pricing auto insurance.

» MORE: Does getting insurance quotes affect your credit score?

8. Your home ownership. Some companies give homeowners a price break on car insurance, even if you 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.

» MORE: Will you save money bundling insurance? Not always

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. In some cases you might need a company that specializes in insuring high-risk drivers.

» MORE: How much car insurance rates go up after an accident

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. For a full coverage policy, average rates for a 40-year-old who drives 5,000 miles a year are about 6% less than for one who drives 12,000 miles a year, our analysis found. Low-mileage drivers may also save by choosing pay-per-mile insurance, which tracks how many miles they drive.

» MORE: Should you give up privacy for car insurance discounts?

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, Esurance notes. Your rates are likely to decline as you get more experience behind the wheel.

13. 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.

» MORE: How long auto accidents can affect your insurance rates

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.

» MORE: When to file a car insurance claim — and when not to

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. Sports cars often have high insurance rates, for example, 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 and how much it’s likely to damage another car in an accident, according to the Insurance Information Institute.

» MORE: Ranking the cheapest cars to insure

16. The trim level of your car. Vehicles with extra features like GPS systems 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.

» MORE: Your car-buying cheat sheet

17. The safety features of your car. Vehicles with a strong safety record and good safety equipment can cost less to insure, 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.

» MORE: 5 safety features that can save you money on car insurance

18. Your car’s chances of being stolen. If the model you drive is a favorite of car thieves, your insurance rates will reflect the added risk.

19. Whether you own or lease. Insuring a leased car may cost more than insuring one you own, simply because the leasing company may insist you buy more coverage than you would have chosen. To protect their interests, leasing companies often require collision and comprehensive coverage, a low deductible, and gap insurance to pay the difference between the car’s value and the amount you owe on the lease.

» MORE: How to estimate car insurance before buying a car

Your car insurance choices

20. The insurance company you choose. You can make a huge difference in your car insurance rates by picking the cheapest insurer in your state. We found average rates were more than twice as high for the priciest company compared to 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.

» MORE: Find the best cheap car insurance

21. Your previous insurance company. If you’re switching from a nonstandard insurer, one that mainly covers high-risk drivers, companies may assume you pose a risk. Some large insurers charge higher rates to drivers who were previously covered by a nonstandard insurer, CFA research found. You may also face higher premiums if a policy lapsed and you had a gap in insurance coverage.

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 only the minimum required liability coverage. A full coverage policy includes collision and comprehensive coverage, which will pay to fix your car if you cause a crash or replace it if it’s stolen. Add-ons like new car replacement coverage can boost the price, but the benefits they provide may be worth it to you.

23. The deductible you choose. Your deductible on collision and comprehensive policies is the amount your insurance company subtracts from the cost of 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. 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. You might assume your insurance company automatically applies all the discounts for which you’re eligible. But you might not get the best rate if you don’t ask regularly. 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.

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 interprets the factors differently. So the cheapest insurer for your neighbor may not 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 keep in mind. 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 in the event of 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 that’s on your car, setting up automatic payments, or dozens of other factors.
NerdWallet averaged rates for 40-year-old men and women with no incidents on record and credit in the “good” tier for 20 ZIP codes in each state and Washington, D.C., from the largest insurers, up to 12 in each state.

For the minimum coverage category, we calculated average rates for the minimum insurance coverage required by law in each state. For the full coverage category, we used 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.

For the other two driver profiles, we changed the credit tier to “poor” or added one at-fault accident, keeping everything else the same.

In states where required, minimum additional coverages were added. We used a 2015 Toyota Camry in all cases. These are sample rates generated through Quadrant Information Services. Your own rates will be different.