5 Factors Affecting Your Car Insurance Premium

The cost of car insurance depends on many things, including your age, where you live, the car you drive, your driving record, the coverage you have, the amount of your deductible, and so forth.  consequently, car insurance premiums even for the same coverage vary all over the map.

But, here are 5 factors that influence how auto insurance premiums are set:

1.  Rating Territory

Rates are higher in geographic areas where accident rates, number of claims filed, and average cost of claims paid are higher. Rates reflect auto repair costs, hospital and medical expenses, jury awards, and theft and vandalism in the area.  Even someone with a perfect driving record will be charged the going rate for the area where the automobile is garaged.

 2.  Use of the automobile

Drive less, pay less!  Low annual miles translate into a smaller probability of being in an accident, so you pay lower rates. Rates are also lower if the insured automobile isn’t usually driven to work or is driven less than 3 miles one way.  Premiums rise slightly if you drive more than 3 but fewer than 15 miles to work and increase if your commute exceeds 15 miles each way.

3.  The personal characteristics of the driver

The persons age, sex, and marital status can also affect automobile insurance premiums.  Insurance companies base the premium differentials on the number of accidents involving certain age groups.  For example, drivers aged 25 and under make up about 15 percent of the total driving population but are involved in nearly 30 percent of auto accidents, and 26 percent of all fatal accidents.

Male drivers are involved in a larger percentage of fatal crashes, so unmarried males age 29 or under, and married males under age 25, pay higher premiums than older individuals do.  Females over age 24, and married females of any age, are exempt from the youthful operator classification and pay lower premiums.

 4.  Type of automobile

Insurance companies charge higher rates for automobiles classified as intermediate-performance, high-performance, and sports vehicles, and for rear-engine models.  Some state even rate four-door cars differently from two-door models.  If you’re thinking of buying, say, a Corvette or a Porche, be prepared for higher insurance rates.

5.  Driving record

The driving records, traffic violations and accidents of those insured and the people who live with them affect premium levels.  More severe traffic convictions such as driving under the influence, leaving the scene of an accident, homicide or assault arising from the use of a motor vehicle, and driving wit ha revoked or suspended driver’s license result in higher insurance premiums.

Have your insurance premiums increased because of the aforementioned factors?

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38 comments

  • I am sure the miles I drive totally kill my premium, although I can't even remember how many miles I told my insurer I drive.

    I have a teen driver on my policy and will have a second one on soon. I think one of the best things I can do is make sure they keep a clean record too.

  • YFS /

    Great tip Kris. A clean record is key to low premiums. I would probably go far to say that many people don't know the mileage they told their insurer they drive. When you put your first child on your policy. Did you auto policy go up or down?

  • 5 Factors Affecting Your Car Insurance Premium…

    The cost of car insurance depends on many things, including your age, where you live, the car you drive, your driving record, the coverage you have, the amount of your deductible, and so forth. consequently, car insurance premiums even for the same cov…

  • You're definitely right about Rating Territory. It's too bad there is nothing we can do about this as most of us do not move just to get into better Rating Territory. The key is to constantly look around for cheaper auto insurance. Erie and Geico are usually cheaper options.

  • YFS /

    Good call on Erie Insurance! I currently use those guys for auto and home coverage

  • These same things affect car insurance premiums where I live in Canada. The better driver you are the better discount you get. Also, if you register your vehicle as a pleasure vehicle and you don't drive it to work you can also pay less. We do get decent rates though because there is only one place to get insurance where I live and it is run by the government. I think our rates would go up if competition came in and it was privatized.

  • YFS /

    Miss T,

    That is interesting that you think if insurance was privatized premiums would go up. Many in America think differently. I personally think government run insurance is the cheapest alternative. What do you consider a decent rate? What are you paying now for auto insurance?

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  • Dan Ronatay /

    Basing on the tips given, I am probably better off living in less accident-prone city where my office is just five minutes away, but where is that exactly, right? If only everyone can drive responsibly then the number of accidents will go down and eventually the insurance rates. Something that would probably take time but has a more long-term effect.

  • It depends on the insurance company and its underwriting policy, but most keep a surcharge for three years from the date of the ticket. Ask your agent to be sure.

    Car Insurance Premium

  • Mukesh Kumar Ka /

    I think out of five factors that are mentioned here which influence auto insurance premiums second one is more considerable for me. I mostly drive to my office by car. Now i am planning to stay near to my office. So Drive Less, Pay Less 🙂

  • I just don't know where you got your reference for this article. But anyway, you have got a similar content on some pages I researched.

    For some common issues, personal characteristics and the rating territory have the biggest tributes your insurance premium.

  • Renu Saradadevi /

    It is really a cause of concern for people like me, but an undeniable fact, that even if you are a married woman who drive responsibly, you will be forced to pay a higher premium due to the increasing incidents of vandalism and theft in the area you live in. Great tips for the busy working people like me.

  • Israr /

    israranjum

    In addition to shopping on price, it's also a good idea to learn about consumers' experiences with an insurance company in terms of billing, responsiveness to claims and other customer-service issues. One way to assess this is through the annual J.D. Power National Auto Insurance Survey.

  • it is usually recommended that you find out about consumers' experiences with an insurance company in terms of billing, responsiveness to claims along with other customer-service issues. A great way to check this can be through the annual J.D. Power National Auto Insurance Survey.

  • Well all these are great tips to save us all from high car insurance premium rates.

    I have a son under 20 year and he drives quite rashly.

    If we all know such points we could have able to save some Dollars on car yearly premium.

    In my country there is no such thing available like how much you drive every day, or your age group,

    we basically pay our car insurance premium on the bases of car on road price and yearly depreciation cost and that's it.

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  • I think all of these factors are taken into account to determine the overall risk you pose to your insurer. Few people fit the perfect profile. For example, you could be an unmarried 55-year-old engineer who lives in a large city (cities are more dangerous than rural areas) and has bad credit. Or maybe you're a married 22-year-old honors student with perfect credit who drives a Hummer. Everyone's circumstances are different, and it is the sum of all factors that determine your car insurance rates.

  • I think out of five factors that are mentioned here which influence auto insurance premiums second one is more considerable for us.

  • Dills /

    Nice informative post but i assume there are some auto insurance companies which don't use credit scores while deciding rates?

  • YFS /

    I'm sure some exist, but because they do not use credit scores it is possible that their rates are higher.

    Do you have any experience with companies who do not use credit scores as a factor into car insurance premiums?

  • YFS /

    If and only if everyone could drive responsibly

  • Carlito Torres /

    As car owner, I need to know the factors that affects my insurance premium, and this blog article greatly helps me and I agree all these factors based on my experience.

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  • I’ve read through a great deal of your posts now and I thought I’d personally come up with a opinion and simply go ahead and say that you submit wonderful information in this article. Saved to fav this amazing site long ago and also have been here for a while. Again, appreciate your creating all of this readable for the community.

  • Some other factors include:
    1. credit score
    2. discounts that happened to be available when policy was created

    Shopping around can take care of #2 and just paying your bills on time can fix problems with #1.
    My recent post International Drivers and Driving Abroad

  • URFinanceSimple /

    Good tips Jim… you're absolutely right :-)On Mon, Sep 10, 2012 at 10:23 AM, YFS <yourfinancessimplified@gmail.com> wrote: approve

  • What’s up, just wanted to say, I liked this post. It was practical. Keep on posting!

  • linda /

    insurance rates also depends upon your credit score……the more you spend from your credit card….the more premium you pay……..and if u can control to keep your credit score below 30% of your total credit limit….you will surely save some amount on insurance premium….anyways…….u hav posted very good info about insurance….keep it up:)

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  • Great tips. I’d never thought about how my geographical location might affect the cost of my car insurance.

  • Jenny,

    You’re commenting on behave of americaninsurance. I’m sure you knew that your location has bearing on your insurance rates.

  • Before getting any kind of insurance, it is important that you know your status and all your important information are up to date. These important details may affect you insurance premium that is determine based on different factors. As what you delivered in this article, these may help and give ideas to people that will get insurance. This will also help them to be ready in all of these factors so that they will not be surprise when they will encounter any kind of circumstances within the coverage.

  • Lately, more and more factors are being taken into account. For example, credit score is a very important factor that can save you as much as 25% or cost the same. Auto insurance companies like to see that policyholders are on a solid financial ground and they are not going to make false or exaggerated claims because they need the money.

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