What Determines The Price Of An Auto Insurance Policy? (2024) (2024)

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Plenty of factors go into determining car insurance costs. Some, like location, vehicle type and driving history, are fairly straightforward. Others, like credit history and marital status, may be a bit more surprising.

#1 Your Vehicle’s Make, Model and Age

The age and type of vehicle you drive impact the cost of car insurance. Insurance companies consider the average cost of claims for different types of vehicles when setting rates. Luxury vehicles with new technology and advanced safety features cost more to repair or replace, so they typically cost more to insure.

So that means a newer, more expensive vehicle with many bells and whistles costs more to insure than an older base-model vehicle with a lot of miles. And a sports car is considered a higher risk than a minivan, so it has a more expensive insurance policy.

The brand of vehicle also affects your auto insurance premium. According to Quadrant Information Services, Dodge has the highest car insurance costs on average, and Mazda has the lowest.

#2 Age

Age can impact car insurance premiums considerably, particularly for motorists under the age of 25 or over 75. This is because insurance companies look at perceived risk when determining rates.

Inexperienced young drivers are statistically more likely to make mistakes or take unnecessary chances behind the wheel, and older drivers tend to run a higher risk of getting into accidents after the age of 70.

*Cost data based off 2022 information

#3 Location

Where you live and where you park your car overnight — known to your insurance company as your garaging address — affects your auto insurance rate. For example, motorists in large cities typically pay higher rates than drivers in rural areas. Here are some reasons why:

• Having more drivers on the road in urban areas means there’s an increased likelihood of collisions.
• There are higher rates of vandalism and theft in large cities.
• Vehicles often don’t have covered or protected parking in cities, leaving them more vulnerable to damage.

Why Is Car Insurance More Expensive in Some States?

In addition to where you live within your state, the state itself affects your insurance prices. If you live in a state where hurricanes or heavy snow are common, you’ll likely pay more for car insurance. If you live in a state that’s densely populated, you can typically expect to pay higher car insurance premiums as well.

Car insurance is regulated by states, so each one has different minimum coverage requirements, if any. Drivers in states that require more than liability insurance or mandate higher policy limits usually pay more for coverage than people in other areas.

Based on the average cost of full-coverage car insurance per state, the most expensive states are Michigan and Connecticut. The states with the cheapest car insurance on average are Maine and Ohio.

#4 Driving Record

Having a clean driving record – meaning no tickets or accidents – is one of the most important things you can do to save money on your auto insurance. Many auto insurance companies offer some type of good driver or claim-free discount to encourage safe driving habits.

Of course, accidents do happen. But different types of accidents and moving violations are rated differently in terms of risk, so they impact your car insurance rates differently. The amount of time an accident or ticket stays on your record varies by state, but it’s generally three to five years. However, some violations, like DUIs, could stay on your record for longer.

A speeding violation for 1 to 5 mph over the speed limit results in an average increase of $409 annually for full coverage. If you have three accidents on your record, your rate will go up an average of $3,620 annually.

#5 Gender

The gender listed on your driver’s license is another factor that affects your car insurance costs. Men tend to have higher premiums because they’re more likely to take risks while driving and get into accidents.

However, the following states don’t allow gender to be used as a factor in determining car insurance rates:

• California
• Hawaii
• Massachusetts
• Michigan
• North Carolina
• Pennsylvania

#6 Marital Status

In every state except Massachusetts and Michigan, your marital status impacts how much you pay for car insurance. Married drivers typically pay a bit less than single drivers.

Part of this comes down to rating, and the other part comes down to discounts. Insurance companies view married drivers as safer, less likely to take risks and more financially stable since they pool their assets. Married drivers might also be more likely to qualify for bundling or multi-vehicle discounts than their single counterparts.

#7 Credit History

In most states, your credit history can also be considered when providers determine your car insurance premiums. Insurance companies view your credit history similarly to your driving history. Drivers with lower credit scores seem more likely to take chances behind the wheel, and they’re considered high risk.

The following states have banned insurance companies from using credit scores to help determine rates:

• California
• Hawaii
• Massachusetts
• Michigan

Maryland allows providers to use your credit score to set your rate on a new car insurance policy but not to raise your rate when you renew, deny you a policy, cancel it or refuse to renew it.

Similarly, Oregon and Utah regulate how credit scores are used by insurance companies. These protections include banning insurers from canceling or declining to renew your policy because of your credit after you’ve had a policy for at least 60 days.

#8 Claims History

Insurance companies are risk averse, and a long claims history will undoubtedly cause your premium to go up. Checking your claim history can tell you how much your rate increases and for how long will vary by insurance company and by state.

Even a single insurance claim, or a claim you weren’t found at fault for, could lead to an increase in your premium. However, some insurance companies offer accident forgiveness if it’s your first at-fault accident, so your rate won’t go up. Otherwise, claims typically stay on your record for three to five years.

#9 Deductible

Though many car insurance rating factors are beyond your control, one you can directly impact is choosing a higher or lower deductible. Generally speaking, the higher the deductible, the lower the insurance rate. But that doesn’t mean it’s always a good idea to go for the highest deductible to pay the lowest premium.

Think about deductibles this way: if you needed to file a claim tomorrow, how much could you

afford to pay without stressing your finances? Keep your deductible close to (but below) that

amount.

If you decide to go with a higher deductible, one option is to put any money you save on your premium into a savings account to have on hand if you ever need to pay your deductible.

#10 Types and Amounts of Coverage

The types of insurance you get and the coverage limits you choose also impact how much you pay for auto insurance. Every state except New Hampshire and Virginia requires some form of auto insurance. But beyond just meeting your legal obligation and the minimum requirements for your state, you have many options for additional car insurance coverage.

It’s important to understand your needs and your finances when choosing types of insurance and their coverage limits. Determine whether minimum or full coverage is best, as well as whether you’d benefit from other add-ons. Below is a list of the types of coverage to consider:

• Collision insurance
• Commercial vehicle insurance
• Comprehensive insurance
• Family car insurance
• Gap insurance
• Liability car insurance
• Non-owner auto insurance
• Mechanical breakdown insurance
• Med-Pay insurance
• Personal injury protection insurance
• Rental car insurance
• Roadside assistance
• Uninsured motorist insurance
• Full coverage insurance

If you’re shopping for car insurance, you likely can’t do much about your marital status, credit score, claims history or the rest right this moment. But that doesn’t mean you can’t do anything to try to lock in a better car insurance rate. Getting car insurance is easy with our guide.

Here are a few tips to help you reduce your car insurance costs.

Compare Quotes From Providers

Because car insurance companies are constantly competing for market share, they’ll often adjust rates up and down to try to gain a competitive advantage. Shop around to see if other carriers have better rates. Most providers offer online quotes. From there, you can compare car insurance quotes from at least three companies.

Be sure to provide the same information and choose the same coverage options with each company to ensure you get accurate comparisons.

Change Your Coverage Options

It’s wise to assess your car insurance regularly to make sure it’s keeping pace with any changes in your life. Moving, getting married or getting a raise can all impact your car insurance needs. If you’re looking for ways to save money on your car insurance, you can start by doing a quick review and adjustment of your coverages, limits and deductibles.

Consider Telematics Insurance

Many car insurance companies offer some type of usage-based insurance or telematics program. These help customers save money based on how safely they drive. Using an app or a device that plugs into your car, these programs monitor driving behaviors and reward you for practicing safe driving and avoiding risky behaviors such as speeding and hard braking. Read more about telematics programs in our best car insurance apps article.

Additionally, premiums often factor in how many miles you drive. So if you don’t drive a lot, telematics insurance can be particularly worthwhile.

Source: Mapfre Insurance

Ask About Car Insurance Discounts

Whether you purchased your policy online or through an insurance agent, make sure you got all of the discounts you’re eligible for.

Discount types and amounts vary from one insurer to another, but here are common car insurance discounts to look for:

• Anti-theft device discount
• New car discount
• Multi-car or multi-driver discount
• Bundling discount
• Good driver or defensive driver discount
• Claim-free or accident-free discount
• Good student discount
• Military or veteran discount

Raise Your Deductible

As a general rule of thumb, having a higher deductible means your premium will be lower. Consider raising your deductible as high as you can comfortably afford to earn some savings.

Car insurance essentially boils down to avoiding risk. By understanding your policy, driving safely and adjusting your coverage to fit your changing needs, you may be able to save on your car insurance significantly over time.

Recommended Providers for Car Insurance

While many factors affect the cost of your auto insurance policy, the company you choose also impacts that cost. We recommend comparing at least three providers when shopping for auto insurance. After our research, we’ve found State Farm and Geico to be good places to start.

State Farm: Best Customer Experience

As the country’s largest auto insurance provider, State Farm owns nearly 17% of the market share. Its reputation in the industry and its availability are two of the biggest reasons we named the company Editor’s Choice. State Farm also offers the ™ program, which rewards safe driving habits with discounts.

Read more: State Farm insurance review

Geico: Best for Budget-Conscious Drivers

When it comes to affordable car insurance, Geico offers the best average rates for most drivers. It’s quick and easy to get a quote online. Geico also offers a telematics program, DriveEasy, that allows safe drivers to save on their car insurance rates.

Read more: Geico insurance review

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.

Here are the factors our ratings take into account:

• Cost: Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
• Coverage: Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
• Reputation and experience: Our research team considered market share, ratings from industry experts and years in business when giving this score.
• Availability: Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
• Customer experience: This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.

Our credentials:

• 800 hoursresearched
• 45 companiesreviewed
• 8,500+ consumerssurveyed

*Data accurate at time of publication.