Factors That Impact Your Car Insurance Rate

Last updated February 8, 2024

How car insurance companies determine your rates

The cheapest car insurance for you might not be the cheapest for your neighbor, friend, or relative. This is because car insurance companies charge drivers differently, depending on their driver profile. Your driver profile is made up of a combination of many different factors including who you are, where you live, and how you drive.

Auto insurance companies assess your driver profile for risk, and the riskier they think it is, the more they’ll charge you for insurance. While each company has its own unique formula, most use the same set of factors to calculate this risk.

Some factors, like your age, will impact your rate more than others, such as your marital status. So while a single 40-year-old might pay slightly more than a married 40-year-old, the difference between what the same 40-year-old pays and what a 19-year-old pays will be much larger.

Additionally, some states have restrictions around what factors insurance companies are allowed to consider when calculating their rates. One is example is California, Hawaii, and Massachusetts all prohibit insurance companies from assessing credit history when determining rates.¹

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Factors that impact your rate

The national average cost of car insurance is $1,824 per year for a full coverage insurance policy. However, every driver pays a different rate for coverage based on their unique driver profile, vehicle, coverage choices, and more. Below are some of the most common factors that impact your car insurance rate and how you can expect them to affect you.

Coverage and limits

The most obvious impact on your rates is the kind and amount of coverage you buy. A minimum coverage car insurance policy, which is required in almost every state, will have the lowest premium. You can expect to pay 60% less on average for a minimum coverage policy, but it will provide the least amount of protection.

When you cause an accident, minimum coverage insurance pays for the other driver’s bodily injuries and property damages. It doesn’t provide any coverage for your vehicle or your medical expenses.

For more protection, you can get a full coverage insurance policy, which provides liability insurance, collision insurance, comprehensive insurance, and medical payments insurance. A full coverage policy will pay for your vehicle repairs and medical bills after an accident, but it costs more than a minimum coverage policy.

If you’re wondering, “how much insurance do I need,” it mostly comes down to personal preference. But it also depends on where you live and whether you own the vehicle.

In most states, car owners are only required to carry a minimum amount of liability insurance to register their vehicle and legally drive. However, if you lease or finance your vehicle, many lenders will require you to carry full coverage in case something happens to the car.

It’s also important to note that lowering your coverage limits doesn’t always help you save money. For a policy with coverage limits of 100/300/100 and a $500 deductible, the average annual premium is $1,824. To compare, when the limits are lowered to 50/100/50 with a $500 deductible, the average rate is only about $10 less per year.

Location

Perhaps the biggest factor in determining your car insurance rate is your location.

According to our rate data, Vermont is the cheapest state for car insurance, with an average rate that’s about 41% less than the national average. Other states with cheap car insurance include Idaho, Maine, Ohio, and Wyoming.

The most expensive state for car insurance is New York, with an average annual premium that is 67.8% more than the national average. We found that Louisiana, Florida, New Jersey, and Delaware also have some of the highest average premiums in the country.

There are a few location-specific factors that can affect the cost of your car insurance policy. For example, if you live in a state with extreme weather, like hurricanes or floods, insurers in that area might charge higher rates for auto insurance. If you live in a densely populated city, car insurance rates also tend to be higher.

Additionally, each state has its own set of requirements for how much insurance you need to carry, and car insurance companies have their own data on which states file the most claims, and this can impact your rate as well. For example, if a company has a higher number of claims from the state of Florida than the national average, they might assume Florida drivers will be riskier to insure and they’ll set their prices accordingly.

Related: Shop insurance by state

Your ZIP code can also impact the cost of your auto insurance. For instance, if you park your car in a ZIP code that is densely populated, or has a high rate of crime or vehicle thefts, you might pay more for car insurance. This is why people who live in the country generally pay less than people who live in cities.²

Age

Another huge factor in your car insurance rate is your age. Car insurance companies see teenage drivers as most risky to insure, since they have the least amount of driving experience and are more prone to take risks on the road.³ Alternatively, those between ages 35 and 75 typically have lower base rates.⁴

According to our rate data, the average cost of car insurance for a teen driver on their own policy is $7,401 per year. When a teen stays insured on a parent’s policy and shares one vehicle, the average rate is $4,189. For a teen on a parent’s policy and two vehicles, the average rate is $5,823 per year.

While teen drivers pay the highest rates for car insurance, premiums usually start to drop around age 25, and are the lowest between the ages of 45-65. Once a driver reaches their 70s, rates typically increase again.

Related: Shop insurance by age

Gender

Your gender may have an impact on your car insurance rate. Some car insurance companies see young females as less risky to insure than young males. However, the impact your gender has on your rates tends to diminish as you get older.²

For single males, the average cost of car insurance is $1,824 per year for a full coverage policy. For single females, the average rate is slightly lower at $1,821 per year for full coverage. While males do tend to pay higher rates for car insurance than females, the cost difference is very small.

Marital status

Car insurance companies typically provide cheaper quotes to married people⁵, who are viewed as less likely to take risks and more likely to combine their policy with their spouse’s – which is more valuable to insurance companies. Additionally, married couples can often qualify for a multi-vehicle discount if they insure two cars.

The average cost of car insurance for married drivers on their own policy is $3,645 per year (combined for two policies). For married couples on a joint policy with two vehicles, the average rate is much lower, at $2,797 per year. For couples on a joint policy and only one car, the average rate is even lower, at $1,716 per year.

Homeownership

Owning your own home may lower your car insurance rates, especially if you bundle your home and auto policy with the same insurance company.

Related: Shop for home insurance

Credit score

Your credit score and/or credit history may impact your rate. Some insurance companies correlate higher credit scores to clients that may tend to be more risk averse. California, Hawaii, and Massachusetts do not let insurance companies use credit score in calculating their rates.¹

In general, drivers with excellent credit pay the lowest rates for car insurance. Our rate data shows that drivers who have excellent credit pay $1,512 per year for car insurance, which is 17% less than the U.S. national average.

For drivers with good credit, the average rate is $1,824 per year and for drivers with fair credit, the average rate is $2,243 per year. People with poor credit typically pay the highest rates. The average premium for a driver with poor credit is $3,358 per year, which is 84% higher than the national average rate.

Vehicle

Year, make, model, and trim level all affect your car insurance rates. It all boils down to this: the more your car will cost to repair or replace, the more it will cost to insure. This is why SUVs are cheaper to insure than luxury vehicles, and cars that are five years old are cheaper to insure than brand-new vehicles.

Additionally, recent safety features that have been proven to reduce the chances of an accident – such as lane departure warnings or blind spot sensors – may help lower your car insurance rate.

Based on our rate data, the Subaru Outback and Subaru Forester are the cheapest cars to insure among recent popular models, with an average premium of $1,691 and $1,737, respectively. We also found that the Mazda CX-5 and Volkswagen Tiguan have below average rates.

On the opposite end of the spectrum is the Tesla Model S, which is the most expensive car to insure, on average. We found that the annual Model S insurance premium is roughly $4,048, which is more than 90% higher than the U.S. national average rate. Among popular recent models, other cars with an above-average car insurance rates include the Tesla Model Y, Dodge Charger, and Tesla Model 3.

Driving record and incident history

Yes, car insurance companies will pull up your driving record when determining your rates. Incidents like accidents and past claims may impact your rate.

Tickets and traffic violations can also greatly impact your insurance rate. Each state has parameters around what violations can affect your insurance and by how much, but typically, you can expect the impact to be proportionate to the severity of the violation (ie a 10mph speeding tickets won’t hike up your rates as much as a DUI or reckless driving infraction).⁶

Years of driving experience

Sometimes, car insurance companies look at not only your age but also how long you’ve been driving. The idea here is that the more driving experience you have, the less risky you are to insure.

Annual mileage

Your annual mileage refers to an estimate of how much you drive on average each year. Someone who drives 10,000 miles a year is typically cheaper to insure than someone who drives 30,000 miles, since the more miles you drive increase your chances of an accident.

Insurance and claims history

People who have been insured continuously for 3-5 years or more with little to no insurance claims usually pay lower rates. Insurance companies see people with large gaps in insurance coverage or those with a history of making a lot of insurance claims as more risky investments.

Vehicle ownership

This refers to whether you own, lease, or finance a car. Even though your car insurance company might not factor this information into their rates, some lenders require a certain base level of car insurance which may not be the cheapest option.

Common discounts

Car insurance companies also offer discounts for certain qualifying factors.⁷ When you receive a quote from a provider, be sure to ask if you qualify for any discounts or can easily earn a discount. Some common discounts include:

Military status – active military or veterans often get discounts on their car insurance.
Education level – those with more completed levels of education may pay less for insurance.
Full time employment, auto pay setup, or paying in full at start of policy as opposed to monthly – these all indicate to insurance companies that you are less likely to miss a payment.
Low mileage – the less you drive, the less likely you will get into an accident.
Loyalty – if you’ve been with the same provider for a few years, you may qualify for a loyalty discount.
Bundling – if you bundle your home, renters, or special insurance policy with your auto insurance, you may qualify for a discount.
Safe drivers discounts – sometimes, insurance companies will give discounts to safe drivers who haven’t had any reported incidents, installs a device that monitors their driving, or takes a defensive driving course

Finding the best insurance rate for your driver profile

All of these factors make up your driver profile, and your specific driver profile will be more attractive to some providers than others. Because of this, it’s important to compare quotes form multiple providers to find the cheapest insurance for your unique situation.

Rate Retriever will find the car insurance companies most likely to give you the best rates based on your driver profile. Take our quiz to get started.

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Frequently asked

What are the key factors impacting car insurance rates?

There are a variety of factors that are used to determine your insurance premium. Some of the most notable factors include your location, age, credit score, driving record, vehicle type, policy type, and coverage limits.

What are 3 factors that influence your car insurance?

Three of the biggest factors that influence your car insurance premium are your location, age, and vehicle type.

What factor has the biggest impact on car insurance cost?

Your location has the most significant impact on the cost of your car insurance policy. Location-specific factors, like the population density, crime rate, weather risks, and the number of uninsured drivers in the area can all affect the cost of insurance.

Why is car insurance so expensive?

Car insurance can be expensive because insurance companies assume risk when they insure you. When drivers cause an accident or their vehicle needs to be fixed, insurance providers have to pay a big settlement to cover their loss. As a result, insurers sometimes charge high rates for coverage as financial protection in case of a claim.

How is insurance premium calculated?

Insurance companies use many different rating factors to calculate rates for each individual driver. Some of the factors insurers look at are your location, age, gender, credit score, driving record, vehicle type, and claim history. However, each insurer uses a different algorithm or formula to determine rates.

Sources

About Rate Retriever

At Rate Retriever, our mission is to make the way you shop for insurance transparent and fair through user-friendly tools that respect your privacy and deliver reliable, comprehensive results.

So we took everything we hated about comparing insurance quotes online – the spam, the long questionnaires, the limited choices, the inaccuracy of quote prices – and threw it out the window, favoring a short form that more accurately estimates what you’ll pay at each of the top insurance providers near you.

Rate Retriever is an independent company that is not owned by an insurance provider, nor do we provide insurance ourselves. This independence allows us to be your free and impartial insurance research tool, helping you make the best decisions for your insurance needs.

We may earn a commission when you click one of the links or call one of the providers listed on our site; however, we do not allow our partnerships to influence which information we provide.

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