What Affects Your Car Insurance Rates?

Factors like your age, driving history, vehicle type and usage, where you live, your coverage choices and, in some states, your gender and credit history affect your car insurance rates. Insurers use these rating factors to determine how likely you are to file a claim. Riskier drivers typically pay more for car insurance. 

Car insurance companies use a mix of personal, driving, location, vehicle, and policy-based factors to determine your personalized rates. Insurers use these factors to estimate the likelihood and potential cost of future claims.

How they use them and how much each factor affects your premium varies by company. State laws also determine which factors insurers can use and how they can use them. 

Here’s a breakdown of each type of rating factor and how it affects car insurance rates.

Some personal factors have more weight than others. For example, your age and credit can have a much bigger impact on your rates than your gender or marital status. 

Age

Younger drivers generally pay more because they have limited driving experience and are more likely to exhibit risky driving behaviors like speeding and distracted driving, which dramatically increases their risk of claims.¹ According to Luva’s research, about 36% of shoppers under 25 report at least one violation, compared with 18% among shoppers 75 and older.²

Gender

Gender can affect car insurance rates where state law permits insurers to use it. Men often pay more because they’re typically more risky behind the wheel than women, resulting in more frequent and severe crashes.³ The use of gender as a rating factor is prohibited in California, Hawaii, Massachusetts, Michigan, North Carolina, and Pennsylvania.⁴

Marital status

Married drivers often pay a bit less than single drivers because insurers consider them a lower risk of filing claims. 

Credit score

Insurers in most states can use a credit-based insurance score as a rating factor because research shows drivers with poor credit typically file more claims.⁵ Your score is generally based on a mix of payment history, outstanding debt, length of credit history, new credit applications, and your credit mix.⁶

Drivers with bad credit pay about 145% more per month for car insurance than drivers with very good or excellent credit, as shown below.

Your driving habits can have a major impact on what you pay for car insurance. Insurers may consider violations, claims history, mileage, and telematics data to set your premiums. 

Driving record

Drivers with a clean record often get the cheapest rates, while drivers with violations on their record pay more because insurers consider them more likely to file future claims. If you have a blemish on your record, you’re not alone. More than one in four insurance shoppers report at least one violation on their record, according to Luva’s research.²

The type of violation also matters. Drivers with a speeding ticket pay about 30% more than those with a clean record, while a DUI raises premiums by about 90%. 

Claims history

Your previous claims can affect your rate because insurers use past history to assess future loss risk. Even when an accident wasn’t your fault, the claim can remain on your insurance history. It may have a small effect on your premium.

Annual mileage

Your rate can change based on your annual mileage, as driving more generally increases your risk of an accident. So, you might pay more for car insurance if you drive frequently or have a long commute. 

That said, if you drive less than 8,000 miles per year, you may qualify for a low mileage discount with some insurers. 

Usage based and telematics data

Usage-based insurance, or UBI, uses telematics from your vehicle or smartphone to log your mileage and track your driving habits, such as speed, braking, acceleration, and time of day. Safer driving behaviors may qualify you for a lower premium, but some insurers may raise rates for risky drivers.⁷

Where you primarily park your vehicle can affect your rate because insurers price for local claim conditions. State laws, ZIP code, traffic density, theft rates, repair costs, accident frequency, and weather patterns can all contribute to differences in premiums based on where you live.⁸

State laws

State insurance requirements affect what coverage you need to carry. Almost all states require some level of liability coverage. Some also require additional coverages, such as personal injury protection (PIP) or uninsured motorist coverage, which can drive up premiums. Whether your state is at-fault or no-fault also affects what you pay. 

Location

Car insurance rates can also vary by ZIP code and by where you live within a state. For example, if you live in an urban area with more traffic, you might pay more than someone who lives in a rural area.

Weather

Severe weather can increase claims for flooding, hail, wind, falling objects such as tree branches, and other damage. These losses can raise insurance costs in areas where weather-related claims are more frequent.

Your vehicle’s make, model, age, value, usage, safety features, and theft history can all affect your rate. Insurers consider how much it costs to repair or replace and how likely it is to be damaged or stolen.

Make and model

Insurers use repair costs, parts availability, and loss data from organizations like the Insurance Institute for Highway Safety (IIHS) to determine base rates for different makes and models.⁹ Vehicles that cause more damage or are more frequently involved in crashes typically cost more to insure.

Age and value

Insurance companies also consider the vehicle’s value. The more an insurer could potentially pay out for a claim, the more your coverage will cost, which is why higher-value and newer vehicles typically cost more to insure. Older models may cost less as their value declines.¹⁰

Usage

The way you use your vehicle also matters. Insurers typically offer lower premiums for pleasure vehicles you only drive occasionally compared to cars you use daily to commute to work or school. 

Safety and theft profile

Vehicles that lack safety features or that have higher theft rates often get higher rates. Vehicles with excellent IIHS or NHTSA safety ratings often have cheaper rates because they better protect occupants.¹¹

Your policy choices can change your premium even when everything else about you stays the same. Coverage level, liability limits, deductibles, prior coverage, and bundling policies can all affect the price you pay.

Coverage level and limits

Full coverage costs more than liability-only because it includes comprehensive and collision coverage for your vehicle. Raising your liability limits beyond your state’s requirements will also increase your rates, but can provide valuable protection if you have assets you want to protect.¹²

Deductibles

Raising your deductibles lowers your premium because you take on more risk, but increases your out-of-pocket costs if you file a claim. According to the Insurance Information Institute (III), you could save up to 30% on your comprehensive and collision coverages by raising your deductibles from $200 to $500.¹³

Coverage lapse

Insurers may also consider your prior insurance history when setting premiums. A lapse in coverage could raise your rates by about 25% compared to a driver with continuous coverage.

Bundling

Bundling auto and renters or home insurance with the same company can usually qualify you for a multi-policy discount, though the savings vary by insurer. Most companies also offer multi-vehicle discounts if you insure more than one vehicle.

You can’t change every factor insurers use, but you can control several important ones. Here are some ways you can lower your rate:

• Maintain a clean driving record. Avoid violations and accidents to get the cheapest rates.

• Improve your credit. Check your credit report for inaccuracies, report errors, make payments on time, and lower your debt to raise your score.

• Right-size your coverage and deductible. Choose coverages and limits that protect your finances without paying for coverage you don’t need.

• Choose a cheaper-to-insure car. Compare insurance costs before buying a new car, not after.

• Drive less when possible. Lower annual mileage may lower your premium with some insurers.

• Apply discounts. Ask your insurer which discounts are available so you can apply as many as you qualify for to maximize your savings.

• Compare insurers. Each insurer uses its own rating formula, so it’s important to compare the same coverage types, limits, and deductibles with several companies to find the best price. 

Luva can help you compare rates from multiple insurers so you can evaluate both price and coverage before choosing a policy. Need help selecting coverages? Ask Lu.