How Insurance Companies Calculate Your Car Insurance Rate (What to Know in 2024)
How insurance companies calculate your car insurance rate varies, but they usually look at specific factors, including age, driving record, and vehicle, to determine rates. For example, 18-year-old males pay $163 more than 30-year-old males. Learn how car insurance companies calculate rates and how to lower costs.
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Brad Larson
Licensed Insurance Agent
Brad Larson has been in the insurance industry for over 16 years. He specializes in helping clients navigate the claims process, with a particular emphasis on coverage analysis. He received his bachelor’s degree from the University of Utah in Political Science. He also holds an Associate in Claims (AIC) and Associate in General Insurance (AINS) designations, as well as a Utah Property and Casual...
Licensed Insurance Agent
UPDATED: Sep 11, 2024
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.
UPDATED: Sep 11, 2024
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
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How insurance companies calculate your insurance rate will vary depending on factors like your age, driving history, sex, number of miles driven per year, type of car, and more.
When car insurance companies set car insurance rates they tend to favor customers who, statistically, are likely to be good risks while charging high-risk customers higher premiums. A good risk to an auto insurance company is someone who is not likely to get into a car accident or otherwise file a claim to recover under their auto insurance policy.
TIP: When comparing auto insurance rates, it’s good to understand the factors affecting your premium. By knowing how your auto insurance rates are calculated, you can find ways to lower your payments.
See how much you could save on coverage by entering your ZIP code into our free quote comparison tool above.
- Insurance rates depend on age, driving record, and vehicle type, among others
- Higher-risk customers pay more, while lower-risk ones enjoy lower rates
- Understanding these factors helps cut costs
Your Car
Your car’s year, make, and model will impact auto insurance rates. The newer the vehicle, the more expensive the vehicle, and the more costly it will be to insure. Each vehicle is also rated by insurance companies and given a numeric symbol that represents how risky the vehicle is to insure.
Auto Insurance Monthly Rates by Age, Gender, & Coverage Level| Age & Gender | Minimum Coverage | Full Coverage |
|---|---|---|
| Age: 18 Female | $179 | $416 |
| Age: 18 Male | $216 | $501 |
| Age: 30 Female | $49 | $128 |
| Age: 30 Male | $53 | $139 |
| Age: 45 Female | $46 | $119 |
| Age: 45 Male | $45 | $119 |
| Age: 60 Female | $41 | $106 |
| Age: 60 Male | $43 | $110 |
A lot goes into a vehicle’s symbol – year, make, model, safety features, crash information, etc. – are all calculated ahead of time to determine how much an insurance company should charge for insuring that car. Different models will also have different costs. For example, auto insurance for sports cars would be higher than SUVs.
If you’re thinking about buying a new vehicle and have one or two in mind, call your insurance carrier and see how the different year, makes or models may affect your rates. It might be your deciding factor.
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Your Age, Gender, and Marital Status
Car insurance companies will use personal factors such as age, gender, and marital status into account when setting auto insurance rates.
- Age: Age is a factor for people under 25, and for people over retirement age (depending on the insurance company). Both teenagers and seniors tend to have higher auto insurance rates because they are statistically more dangerous drivers than other age groups. However, elderly drivers can benefit from their experience and prior driving history. Auto insurance costs for 18-year-olds can be high, but you can look for ways to save on insurance, like utilizing discounts and raising your deductibles.
- Gender: Women have historically been at a lesser risk of serious car accidents than men, and will get lower rates.
- Marital Status: You can get a marital discount for being married. Just got hitched? Congratulations! Now, call your auto insurance carrier and ask what car insurance discounts are available to you.
Miles Driven Each Year
The less you drive, the less likely you are to cost the car insurance company by getting into an accident or filing a claim. This is why you are asked for the mileage you drive back and forth to work each day.
Brandon Frady Licensed Insurance Agent
The use of your vehicle usually gives the insurance carrier a good idea of your exposure to the road. If you are lucky and work close to home, this could save you not only in gas back and forth to work but also on your auto insurance rates. You can also try pay-per-mile insurance coverage if you want to save more on your insurance.
Home Location
Geographic location is one of the factors insurers use when pricing your auto policy. Auto insurance rates can change based on the following:
- Urban v. Rural: City dwellers generally pay more for insurance than those living in rural areas because the likelihood of an accident or theft increases where populations are larger. However, if a rural dweller lives in a region where dangerous weather is a constant concern, their auto insurance rates may be higher due to the increased risk of damage.
- State Laws: Some states can require more auto insurance coverage than other states, which can increase auto insurance payments.
If you live in an area considered high-risk, the best thing to do is shop for cheap insurance. Learn how to save money by changing your car insurance policy.
Thinking of moving? Check first to see how the change in ZIP code might affect your rates.
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Your Credit Rating
The use of credit rating in car insurance premiums is standard in the industry. The thought is, the higher your credit score, the less risk you will be and therefore, the lower your premium.
If you have a lower credit score and still want lower prices, check out this list of the best car insurance for high-risk drivers.
Your History
Whether with the same company or another company, having insurance for the prior six months can make a huge difference in your premium. Most companies give a renewal discount.
If you remain with them and are accident and ticket free, you will see a slight discount on your premium (or at least it will not go up in rate) upon renewal of your car insurance. They also ask when comparing car insurance rates if you have had six months prior insurance. If not, you will see a huge jump in your rate!
TIP: Maintain your auto insurance and avoid lapses in coverage. This will ensure you keep a level premium when comparing rates.
Driving Record
Your driving record is probably the most significant factor in your auto insurance rates, particularly if you are a high-risk driver with a history of accidents, traffic violations, or DUI arrests or convictions.
You are probably wondering who has access to my driving record? And how long do violations stay on a driving record? Insurance companies can view your driving records; if you have a violation, it will stay there for up to 10 years. Underwriters look closely at your driving history to determine if you are a greater risk due to your driving habits.
TIP: Drive responsibly, not only for the sake of your auto insurance rates but for the other drivers on the road.
Now that you know what factors affect car insurance rates, there are things you can do to significantly lower your rates. Watch this video for tips to save on car insurance.
For more information about getting the right car insurance policy to fit your needs, check out the following articles:
- Save Money by Comparing Online Car Insurance Quotes
- Get Low Cost Car Insurance with Driver Discounts
- What to Know About Car Insurance Agents Before You Buy
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Case Studies: Understanding How Insurance Companies Calculate Your Car Insurance Rate
Check out these case studies below to understand more about how
- Case Study #1 – The Impact of Driving Record: John, a 25-year-old driver, has a clean driving record with no accidents or traffic violations. His insurance company considers him a low-risk customer and offers him a competitive car insurance rate.
- Case Study #2 – The Role of Vehicle Type: Sarah recently purchased a brand-new sports car. The insurance company considers sports cars to be higher risk due to their powerful engines and increased likelihood of accidents. As a result, Sarah’s insurance premium is higher compared to someone driving a standard sedan.
- Case Study #3 – The Importance of Mileage: Michael, who works from home, drives very few miles each year. His limited mileage reduces the chances of being involved in an accident, and his insurance company rewards him with lower premiums.
- Case Study #4 – The Influence of Home Location: Emily lives in a densely populated urban area with a high rate of car theft and accidents. The insurance company considers her location a high-risk area, leading to higher insurance rates compared to someone living in a safer neighborhood.
- Case Study #5 – The Significance of Credit Rating: Alex has a high credit score, indicating financial responsibility. Insurance companies often associate a good credit rating with lower risk, so Alex receives a more favorable car insurance premium.
- Case Study #6 – The Impact of Driving History: Lisa recently switched insurance companies but had a six-month gap in coverage. The new insurance provider sees this as a potential risk, resulting in a higher premium compared to someone with continuous coverage.
For more information on the best type of car insurance to fit your needs, check out this article: Full Coverage Auto Insurance
All of these factors will contribute to your car insurance rates, but you can improve those factors to get save money. Instantly compare quotes by entering your ZIP code below.
Frequently Asked Questions
How do insurance companies calculate your car insurance rates?
Insurance companies calculate car insurance rates by considering several factors. One of the primary aspects is the cost of your car. They also look at the likelihood of theft, the expense of potential repairs, the engine size, and the overall safety record of the vehicle. These elements all contribute to how they calculate insurance rate for your car.
How can I lower my car insurance rate?
Maintaining a good driving record is one of the most effective strategies to lower your car insurance rate. This positively influences how an insurer calculates insurance risk and helps keep your auto insurance costs down when they calculate your car insurance premium. Knowing why auto insurance rates go up is also a good way to know how to lower your insurance.
What are three factors that lower your cost for car insurance?
Three key factors that can lower your car insurance cost include age, location, and driving history. Generally, the less risky your rating factors are, the more affordable your car insurance policy will be. Significant factors like your driving record or the type of vehicle you own can notably impact how car insurance is calculated, influencing the final amount when insurers calculate car insurance cost.
Is insurance price negotiable?
Similar to utility services like electricity or gas, you can’t negotiate a lower monthly car insurance payment. However, you can explore how insurance rates are calculated and compare providers to find the best option. Understanding how to find car insurance rates and comparing them is your best approach to securing a more affordable policy.
What do insurance companies look at to determine your premium?
When determining your premium, insurance companies consider various factors depending on the type of coverage you’re seeking. They might evaluate your driving record, claims history, gender, credit history, family medical history, location, marital status, lifestyle, health, smoking status, hobbies, and occupation. All these factors play a role in how they calculate auto insurance and ultimately calculate your car insurance premium.
What causes a low auto insurance score?
A low auto insurance score can result from unfavorable credit factors such as multiple past-due payments, high utilization of available credit, and numerous recent credit applications. These issues can negatively impact the insurance rate calculation and influence how auto insurance rates are determined.
Does credit score affect car insurance rates?
Yes, your credit score can influence your car insurance rates. However, other factors also play a role in how car insurance rates are determined. These include your driving record, the make and model of your vehicle, your claim history, and how you use your car. All these elements are considered when calculating insurance rates.
How do insurance rates work?
Insurance rates are determined by several factors, such as the type of coverage you choose, your age, location, and your claim history. These elements are key when insurers calculate the cost of car insurance. Understanding these factors is essential when calculating car insurance rates.
How does age affect car insurance?
Age has a significant impact on car insurance premiums. Typically, the average premium per driver decreases notably from ages 19 to 34, then stabilizes or decreases slightly until around age 75. After age 75, the average premium generally starts to increase. Understanding this trend is important when learning how to calculate car insurance rates. Learn more about average auto insurance by age and gender.
How are insurance rates calculated?
Insurance rates are calculated based on various factors, including your driving record, the type of coverage you choose, the make and model of your vehicle, your age, location, and credit history. Insurers assess these factors to determine the level of risk and set your premium accordingly.
Finding cheaper insurance rates is as easy as entering your ZIP code into our free quote comparison tool below.
Enter your ZIP code below to compare cheap insurance rates.
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Brad Larson
Licensed Insurance Agent
Brad Larson has been in the insurance industry for over 16 years. He specializes in helping clients navigate the claims process, with a particular emphasis on coverage analysis. He received his bachelor’s degree from the University of Utah in Political Science. He also holds an Associate in Claims (AIC) and Associate in General Insurance (AINS) designations, as well as a Utah Property and Casual...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.