While knowing the average cost of car insurance is helpful for comparison purposes, it’s important to remember that it’s not a predictor of your car insurance rate. Depending on the state you reside in, car insurance companies may use your age, location, type of car, gender, driving history, claims record, annual mileage and other factors to calculate your car insurance rate. Show
Given that rates vary significantly based on these factors, it can be beneficial to know what influences car insurance rates before buying or renewing your auto insurance policy. With this information in hand, it may be easier to find the best car insurance rates for your household. What factors affect car insurance rates?When purchasing car insurance, your insurer will need to know several pieces of information to quote you a premium. You can usually prepare details about yourself, your vehicle and your insurance history ahead of time to make your process of shopping around easier. Credit scoreYour credit score is important for more than just a car loan – it is also a determining factor when you apply for car insurance. However, there are some states that do not allow the use of your credit score when calculating car insurance rates, including California, Hawaii and Massachusetts. If you are wondering why your credit score is so important, it is used to help predict future behavior. “Credit has been used in the insurance industry since the 90s to help carriers assess the risk of claims being filed,” says Cynthia Moore of Salzburg Insurance in Norfolk, VA. She explained that based on research conducted, people with a lower credit score are statistically more likely to file more claims than those with a higher credit score. Because of this, insurers may factor in the added risk by setting a higher premium. Average annual full coverage car insurance premiums by credit rating
LocationEvery aspect of your location plays a role in determining your premium amount in most states, from your state to your city and even down to your ZIP code. John Espenschied of Insurance Brokers Group, LLC, tells us that the state where your vehicle is parked or garaged is a huge factor. “Rates by states can vary by as much as 400%, with Louisiana being one of the highest in the nation,” he warns. “Twelve states require personal injury protection (PIP) coverage, which significantly boosts the cost of car insurance,” Espenschied explains. “These states are known as no-fault states and require your insurance company to pay for your bodily injury if you are involved in an accident regardless of fault.” According to Moore, your garaging ZIP code provides details of population size, which can impact the likelihood of thefts and accidents. Although it is important to note that, in California and Michigan, car insurance companies are not allowed to use your ZIP code to determine your rates, along with several other non-driving factors. Those who live in severe weather areas may also face higher premiums due to related causes of loss. For example, the NICB reports that more than 422,000 insured vehicles were damaged by Hurricane Harvey, about 300,000 claims after Hurricane Katrina, and 250,500 claims following Superstorm Sandy.
Prior insuranceYour insurance history affects your car insurance rates in two separate ways. Prior insurance shows that you have continually maintained insurance – which is required by every state but New Hampshire, according to Espenschied of Insurance Brokers Group. “People who drive with no insurance and then decide to buy insurance have a much higher likelihood of canceling, especially if purchased simply to renew license plates or go to court to show proof of insurance,” he explains. However, if you have five or more years with one insurance company, Espenschied says it will typically qualify you for better rates. “It shows longevity and willingness to keep insurance year after year.” However, if you have had a lapse in coverage, it could work against you. Some insurance providers may charge you more to cover the additional risk. Driving recordEven with a long insurance history, careless driving habits can negatively impact your premiums. Having incidents on your driving record could lead to insurers viewing you as high-risk and charging higher rates. Comparatively, those with clean driving records may more easily find cheaper rates and qualify for additional savings, such as safe driver and claims-free discounts.
Age and genderDuring your lifetime as a driver, your rates will go up, come down and go back up – based solely on your age, in most states. Teen drivers have four times as many crashes as drivers who are 20 or older, according to the IIHS. This is often a result of inexperience and risky habits. At the other end of the spectrum, the Institute reports that drivers over the age of 70 have higher crash rates than middle-aged drivers – although still not as many as young drivers. Gender also plays a factor in calculating car insurance rates many states. “Men typically have higher premiums than women, especially in the under 25 category,” says Moore of Salzburg Insurance. “Rates stay level between 30-65 and then, with most carriers, you will start to see an increase in rates for drivers over 65, and especially over 75.” When asked why, Moore explained that studies show older drivers have a slower reaction time and decreased vision, causing more claims. The following states do not use gender as a determining factor in calculating premiums: California, Hawaii, Massachusetts, Michigan, North Carolina and Pennsylvania. Average annual full coverage premiums by age and gender
VehicleYou would probably expect a new vehicle to cost more to insure than an older one, but it is not always that simple. Newer cars are typically more expensive to insure due to having new parts. However, if your new car qualifies for additional savings, like for having safety features, it may be less expensive to insure than an older-year car. In addition to newness, size also plays a role. If you know a vehicle’s make and model, you may be able to better gauge what car insurance premiums you will see.
Ways to lower your insurance premiumDespite rate factors, there are other ways to lower your car insurance premium and save money on your policy.
Frequently asked questionsMethodologyBankrate utilizes Quadrant Information Services to analyze 2022 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:
To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2020 Toyota Camry, commute five days a week and drive 12,000 miles annually. These are sample rates and should only be used for comparative purposes. Credit: Rates were calculated based on the following insurance credit tiers assigned to our drivers: “poor, average, good (base), and excellent.” Insurance credit tiers factor in your official credit scores but are not dependent on that variable alone. The following states do not allow credit to be a factor in determining auto insurance rates: California, Hawaii, Massachusetts, Michigan, Washington. Incident: Rates were calculated by evaluating our base profile with the following incidents applied: clean record (base), at-fault accident, single speeding ticket, single DUI conviction and lapse in coverage. Mileage: Rates were calculated by evaluating our base profile with the following differences in mileage: 2k, 5k, 12k (base), 15k and 20k. Model: To determine cost by vehicle type, we evaluated our base profile with the following vehicles applied: BMW 330i, Ford F-150, Honda Odyssey, Toyota Prius and Toyota Camry (base). For new vs used vehicles, we also included the following years in our calculations: 2016, 2017, 2018, 2019 (base) and 2020. Status: Rates were evaluated based on the following marital/family status: single (base), married, 40 year married man and woman with a 16-year-old teen driver. Age: Rates were calculated by evaluating our base profile with the ages 18-60 (base: 40 years) applied. Depending on age, drivers may be a renter or homeowner. Hawaii & Massachusetts rates indicate age is not a contributing factor. Gender: The following states do not use gender as a determining factor in calculating premiums: California, Hawaii, Massachusetts, Michigan, North Carolina, Pennsylvania. Teens: Rates were determined by adding a 16- or 17-year-old teen to a 40-year-old married couple’s policy. The rates displayed reflect the added cost to the parents’ policy. Which of the following would be considered the most important factor in determining the rates and premium for an applicant for an auto policy?Driving Record. Your driving record is crucial in determining your premium and your insurability. Most companies charge substantially more to insure drivers with a history of traffic violation convictions or chargeable accidents than those who have relatively clean records.
Which factors help determine the cost of automobile insurance?The biggest factors that affect car insurance rates are state coverage requirements, age, and the car's make and model. The more coverage you're required to buy in your state and the more valuable your vehicle is, the more you'll pay for car insurance.
What do insurance companies use to determine rates?All insurance companies use data and statistics to predict levels of risk for various individuals or groups. This risk calculation information is also used to develop rating plans. Generally, higher risk factors will result in higher premium rates and lower risk factors will drive premiums lower.
What affects the amount of an insurance premium?Some factors that may affect your auto insurance premiums are your car, your driving habits, demographic factors and the coverages, limits and deductibles you choose. These factors may include things such as your age, anti-theft features in your car and your driving record.
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