25 Factors That Affect Auto Insurance Premiums

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There are a lot of factors that affect how much you pay for auto insurance. Some of these factors are in your control, some are not. Auto insurance companies use a process called underwriting to take your information, assess the risk they believe you present, and then quote a premium. While insurance companies do not all use the exact same criteria in the exact same way to determine insurance cost, there are common factors that all car insurance companies use. Here are 25 of them.

  1. Age: Age is a big factor in auto insurance premiums. If you are under 25, expect to pay more. While premiums for men under 25 are significantly higher than premiums from women in the same age group, all other factors being equal, both can expect to pay in excess of 100% more than an adult base rate. And at the other end of the age spectrum, rates can go up as you enter your golden years.
  2. Gender: Particularly for younger drivers, men can expect to pay significantly more than women.
  3. Driving Record: Your driving record is obviously important to assessing insurance risk. Some insurance companies go back as far as five years. However, as any past accidents or violations age, your premiums can come down.
  4. Type of Vehicle: The type of car or truck you drive impacts premiums in a couple of ways. More expensive cars that cost more to repair send premiums higher. And some cars are more or less prone to accidents. For more details, check out our list of the most and least expensive cars to insure.
  5. Age of Vehicle: this factor relates to vehicle type. As a car or truck ages, its value declines and premiums go down as well. Of course, inflation can cause other factors in the premium to go up. Also, some really old cars my lack safety features that may affect the premium. But all things being equal, an older car generally will be less costly to insure.
  6. Credit Score and History: Study after study shows a high correlation between credit scores and claims history. On average, those with lower credit scores have a higher rate of claims. Just another reason to improve your credit score.
  7. Marital Status: Apparently, married people are, on average, more stable and less accident prone. Just another benefit of marriage!
  8. Where You Live: There are several things going on with your geography. First, some locations are just more expensive than others. It will cost more to repair a car in northern New Jersey than it will in the middle of Ohio. Also, some locations are more accident prone than others due to traffic congestion and patterns.
  9. Claims History: It should go without saying that your auto insurance claims in the past will be factored into your premiums. The good news is that if you go long enough without a claim, some insurance carriers will put you into a category that keeps you from being dropped because of claims. After more than 25 years with Nationwide, I’m in that category, so my agent tells me.
  10. Criminal Record: When you do the crime, you must do the time. And that can mean higher premiums depending on just what crime(s) you’ve been convicted of.
  11. Other Insurance: Most insurance carriers will offer multiple policy discounts. If you get your auto, life, and home owner’s insurance from the same carrier, for example, you should see a discounted rate.
  12. Miles Driven Each Year: Some insurance carriers offer low mileage discounts. We recently wrote about car insurance by the mile. While that option is not available in most states, low mileage discounts are.
  13. Car Alarm: Simple enough. Car alarms reduce the risk of theft, thus lowering premiums. Having lived in Boston for three years, though, I can tell you that against the right thief, they are not much of a deterrent.
  14. Occupation: Insurance companies will factor in what you do for a living. The data indicates that some occupations, and being unemployed, can increase the risk of claims.
  15. Education: Generally, the more education you have, the lower your premiums. Keep in mind that not all carriers use the same underwriting criteria. So exactly how something like education will impact premiums is difficult to determine, but it is a factor.
  16. School Grades: As I’ve told my two children, maintaining at least a 3.0 can shave $100 to $200 a year off of the insurance premiums for teenagers. If my kids don’t maintain at least a 3.0, they will pay the difference!
  17. Driving Distance to Work: If you drive a short distance to work each day, you can probably save a few bucks on premiums.
  18. Multiple Vehicles & Drivers: This is a tricky one. With more than one car, you can get a multiple car discount with most insurance companies. But as my agent recently told me, with teenage drivers, more cars can cost you on a per car basis. Why? With a family of four and two cars, the parents can be designated as the primary drivers of both cars, keeping premiums down. Get a third or even fourth car, and now the teenagers are viewed as primary drivers, and rates per car go up.
  19. Current Insurance & Premiums: Insurance carriers don’t like to see gaps in coverage. If you’ve been with the same insurance company for a number of years and are looking to change, your history with your existing carrier will count in your favor when you compare rate quotes.
  20. Years of Driving Experience: Another obvious factor. With more experience, the risk you present goes down, all other things being equal.
  21. Business Use of the Vehicle: If you use the vehicle for business, the nature of your business and the vehicle’s use will be a big factor in your premiums.
  22. Driver Training: Under various circumstances, driver training classes can reduce your premiums. In some instances, driver training is required due to past infractions.
  23. Resident Student Discount: This is one my insurance agent told me about as we discussed the cost of insuring my two teenagers. Basically, if your child goes off to school without a car and more than 100 miles away, you can get a break on your premiums. If they do take a car with them, you still may get a lower premium depending on the location of the school
  24. Completion of a state-approved senior driver defensive course: For those enjoying the golden years, you may be able to get a discount if you take a course designed for seniors and defensive driving.
  25. Safety feature discount: This usually gets factored in automatically based on the car you insure, but safety features (think air bags, for example), can reduce the cost of insurance.

If you’d like to compare auto quotes to see if you can lower your cost, check out our auto insurance quotes page.

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Published or Updated: March 14, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

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