Five factors that affect your auto insurance payment are how often you pay your premium, your vehicle, your driving history, your credit history and your state's coverage requirements. Insurance companies use most of these factors to determine how likely you are to file a claim and thus how risky you are to insure.
Keep in mind that calculating insurance rates can be complex. Insurance companies use more than five factors when setting premiums, and the criteria used can vary by state. For example, your ZIP code, marital status, gender, and annual mileage can also be used to determine your insurance costs.
5 Factors That Affect Your Auto Insurance Payment
- Payment frequency: A monthly premium payment will obviously be a lower amount than a payment for a full year or six months. However, if you pay monthly, your payments will likely add up to a higher total premium because insurance companies charge more for installments. Your insurer may also offer a discount for paying your premium in full instead of monthly.
- Vehicle type: The type of car you drive can make your insurance go up or down, depending on the make, model, year, if it has certain safety features, or if it is heavily targeted for theft.
- Driving history: Having a clean driving record insures better prices for your insurance premium, but if you have accidents or traffic violations, like tickets for speeding and red light infractions, your auto insurance payment will be more expensive.
- Credit history: In most states, insurance companies use an auto insurance score when calculating premiums. Your credit history is used to generate your auto insurance score, so good credit results in a high auto insurance score and a lower premium, while the reverse is true if you have poor credit.
- State requirements: While liability insurance is required by law in most states, some states require additional types of coverage – like personal injury protection or uninsured motorist coverage – or higher coverage limits than other states, which can increase the cost of your premium.
Other Factors That Affect Your Auto Insurance Payment
- Age: Younger drivers are typically riskier to insure due to their lack of experience and are statistically more likely to get into car accidents, so their insurance rates are higher compared to middle-aged drivers.
- Location: Information about crime, traffic, and accidents in your ZIP code is used when determining how much you’ll pay for car insurance. Typically, drivers in urban areas pay more than rural drivers due to higher rates of crime, traffic, and accidents.
- Gender: In most states, male drivers under 25 years old often pay more for insurance than their female counterparts. The opposite tends to be true for middle-aged drivers.
- Marital Status: Insurance companies typically charge married drivers lower car insurance rates because they are statistically less likely to get into car accidents than single drivers.
- Annual mileage: The more you drive, the more likely you are to get into a car accident and need to file a claim. Since Americans drive around 14,000 miles per year on average, having a higher annual mileage can result in higher premiums.
To learn more, check out WalletHub’s guide on factors that affect car insurance rates.
This answer was first published on 02/14/23 and it was last updated on 02/18/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
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.
What are the 5 factors that influence auto insurance rates? ›
What factors are most important for car insurance rates?
- Age. Age is a very significant rating factor, especially for young drivers. ...
- Driving history. This rating factor is straightforward. ...
- Credit score. ...
- Years of driving experience. ...
- Location. ...
- Gender. ...
- Insurance history. ...
- Annual mileage.
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.
What are 5 factors that are used to determine the cost of insurance premiums? ›
Five factors that affect your auto insurance payment are how often you pay your premium, your vehicle, your driving history, your credit history and your state's coverage requirements. Insurance companies use most of these factors to determine how likely you are to file a claim and thus how risky you are to insure.
What factors affect how much insurance you pay? ›
Factors That Affect Car Insurance Rates the Most
- State requirements. Your state of residence is one of the factors that affect car insurance rates the most, as premiums for state-minimum coverage vary by up to 318%. ...
- Age. ...
- Car make and model. ...
- High-risk violations. ...
- Yearly mileage. ...
- Credit history. ...
- Driving record. ...
- Zip code.
What factors affect car insurance rates?
- Driving record. Drivers with clean motor vehicle records and no at-fault accidents typically get the cheapest car insurance. ...
- Prior insurance. ...
- Credit history. ...
- Location. ...
- Age and gender. ...
- Vehicle.
Here are the main points to keep in mind when selecting an insurance company:
- Licensing. Not every company is licensed to operate in each state. ...
- Price. Many companies sell insurance policies and prices vary greatly from one to another, so it really pays to shop around. ...
- Financial Solidity. ...
- Service. ...
- Comfort.
Claims in your area
If your area has a high rate of theft, accident, or weather-related claims, it becomes riskier for an insurance company to cover drivers there. That risk can lead to an auto insurance price increase, even if you have a perfect driving record.
What six factors should you consider when you are buying auto insurance? ›
Six factors you should consider when buying auto insurance include how much coverage you're getting, the premiums you're quoted, the provider's reputation, the discounts you can qualify for, the deductible you can pay, and any add-ons you may want. Considering these factors will help you choose the best policy.
Which gender pays more for car insurance? ›
Why do men pay more for auto insurance? Men pay more for auto insurance on average because they're statistically more likely to get into accidents and to have major injuries. However, male drivers only pay about $51 more per year than their female counterparts on average.
One of the best ways to keep your auto insurance costs down is to have a good driving record.
- Shop around. ...
- Before you buy a car, compare insurance costs. ...
- Ask for higher deductibles. ...
- Reduce coverage on older cars. ...
- Buy your homeowners and auto coverage from the same insurer. ...
- Maintain a good credit record.
The color of your car doesn't affect your insurance rate. Instead, your insurance company uses other information, like your car's age, location, usage, and your driving record, to help determine insurance rates. Learn more about the factors that impact auto insurance pricing.
What are 4 factors that can affect the cost of life insurance policies? ›
Some factors that affect life insurance costs include your age, gender, health, family medical history, lifestyle and occupation.
What are the factors which affect the premiums on auto insurance quizlet? ›
Value of the insured vehicle: the higher the value of the car, the higher the premium. -Repair record of the car: the more easily car damage can be repaired, the lower the premium. -Your age: younger drivers have less experience and pay higher premiums.
Why is my car insurance so expensive? ›
Your particular driver profile, which includes factors like where you live, your age and your driving record, influences what you pay for car insurance. But rising car repair costs and an increase in disaster-related claims are significant reasons why car insurance rates are surging for many drivers.
What type of things can reduce a driver's insurance premium? ›
Increase your deductible
Depending on your insurance provider, paying a higher deductible (the amount you pay out of pocket before your insurance coverage kicks in, in the event of an incident) is typically a quick and easy way you can make your car insurance payments less expensive.
Does credit score affect car insurance? ›
On average, drivers with poor credit pay 118 percent more for full coverage car insurance than those with excellent credit. California, Hawaii, Massachusetts and Michigan prohibit or limit the use of credit as a rating factor in determining auto insurance rates.
