15 Factors that Affect Car Insurance Rates

Wondering why your car insurance rates have gone up? Here are some of the major things that can cause your monthly premium to change.

Tina Chang
Updated 26 May 2022
15 Factors that Affect Car Insurance Rates
Sections on this page
  1. Your Demographic Information
  2. Driver History and Your Auto Insurance Rates
  3. Your Finances, Occupation, and Home Address
  4. The Vehicle You Drive
  5. Other Factors that Affect Car Insurance Rates
  6. Frequently Asked Questions

Car insurance is a major expense for most families. When determining your premium, insurance companies consider different factors that affect car insurance rates, such as your demographic information, driver history, credit history, location, vehicle, and vehicle modifications.

Regardless of your age or where you live, there are many ways to lower costs by making smart decisions.

Factors that affect car insurance rates.

Your Demographic Information

Insurance companies use data from millions of customers to look for trends in driving behaviors. Insurance companies will adjust your car insurance rates depending on your demographic information. This can include your:

  • Age
  • Gender
  • Education level
  • Marital status

Your Age and Gender

Younger drivers are less experienced on the road and judge risk differently, which increases the odds they will get in an accident. Because of this, car insurance providers will always ask for your date of birth and adjust your premiums appropriately.

Auto insurance companies also know that driving skill declines after age 70 for many people, so they'll increase premiums for drivers under 25 and over 70. The difference between teen driver premiums and 50-year-old driver premiums is around $5,500 annually.

Car insurers also see young male drivers as a greater liability than young female drivers. Teen males pay over $750 more than female teens. However, the difference in rates between genders is negligible after the age of 25.

Your Education Level

Your level of education has a small impact on the car insurance premium you pay. Insurance companies think less-educated adults are more likely to drive aggressively than drivers who attain a higher level of education. However, data compiled by The Zebra shows that the average difference between an adult with a GED and one with a Ph.D. is only $27 every year.

It doesn't make a huge difference, but it's worth telling your car insurance company if you have tertiary education.

Your Marital Status

According to The Zebra, the average married driver pays $96 less annually than single, divorced, or widowed drivers. This is because auto insurance providers generally see married drivers as safer drivers.

Additionally, since many married couples are also homeowners, they are usually offered discounts for bundling their car insurance with their home insurance and other policies.

Are You Paying Double for Roadside Assistance?

Many people may be doubling up on roadside assistance without knowing it. Some insurance policies and new cars come with roadside assistance, so it may make your AAA policy redundant.

Driver History and Your Auto Insurance Rates

Insurance companies look at the past to predict the future, paying close attention to your driving record when determining car insurance rates.

Tickets and Driving-Related Charges

Driving history includes past accidents, traffic violations, and DWI or DUI convictions. If you have a history of these violations, you can expect your car insurance premiums to be higher than usual because you're considering a high-risk driver. Depending on other factors, some car insurance providers may consider you too risky to insure at all.

If you're struggling to find a traditional auto insurance company that will insure you with your less-than-ideal driving history, you may need to purchase a policy from a company that works with high-risk drivers.

As the length of time since your last infraction grows, you can switch back to a traditional insurer.

Car Accident History

Based on recent data, on average, car insurance premiums increase by 49%, or $348 per year, in the aftermath of an accident. Even drivers with accident forgiveness or who are not at fault see minor increases.

Changing insurance providers before your next premium is due does not help, as auto insurance companies use the Comprehensive Loss Underwriting Exchange (CLUE) to look at your driving record and claim history.

CLUE is a database that contains your entire history of auto insurance claims you've had. So even if you try to switch providers, your new provider will see your previous claims and adjust your insurance costs accordingly.

Years of Driving Experience

Driving experience influences how quickly you react to things on the road and whether or not you drive defensively. Car insurance rates decrease as your driving experience increases.

This one is pretty straightforward—car insurance companies assume that more years of driving means a lower likelihood of getting into an accident. However, if you rack up a lot of traffic violations during this time (including DUIs), you can expect your insurance costs to increase.

Your years of driving experience will only lower your monthly premiums if you have a reasonably clean driving record.

How Often You Drive

Drivers who drive only a few miles every week get preferable car insurance rates. This discount occurs because insurance companies know that the less you drive, the lower the chances are that you will be involved in an accident.

Your Finances, Occupation, and Home Address

Credit history, career, and where you live all influence how risky auto insurance companies see you. Car insurance companies examine your history and location before offering you a rate.

Your Credit Score and Credit History

Car insurance is a bill, and insurance companies offer the best rates to those who have a history of paying bills on time. If you have a poor credit history, you may pay twice as much for your policy compared to similar drivers with better credit.

The Insurance Information Institute finds that drivers with lower credit scores are more likely to file insurance claims.

Need to Improve Your Credit Score?

Your credit score impacts more than just your car insurance rates. Learn how to improve your credit score with our handy tips and save money on your insurance.

Your Occupation

Some careers involve a great deal of driving, and insurance companies factor that in when determining your insurance premiums. For example, occupations that involve driving at night or driving long distances tend to get elevated insurance rates. Therefore, keeping your information updated with your insurer is essential, as working from home may decrease your premium.

If you used to drive to the office every day before the COVID-19 pandemic but now work from home, you should inform your auto insurance company of this change. You may see a nice decrease in your car insurance rates just for working remotely!

Your Home Address

Insurance companies customize premiums based on zip code and neighborhood. In cities where vandalism and theft are more common, drivers pay more for car insurance. In rural areas where collisions and theft are rarer, drivers pay less.

Premiums also vary depending on what state you live in. For example, the average premium in Florida is over three times the average premium in Idaho.

Do You Park On the Street or in a Garage?

Other factors that affect car insurance rates include whether you park your car on the street, on your driveway, or in a garage. Generally, insurance costs less if you garage your car at night, as it's less likely to be involved in vandalism or theft.

Your Homeownership Status

Many insurance providers offer a discount for bundling multiple policies through their company. If you get homeowners' insurance, car insurance, and other policies with the same insurance company, you can expect a lower rate than those who do not.

The Vehicle You Drive

Some cars are more dangerous than others. Some types of cars are more likely to be driven by drivers who take excessive risks. The make and model of your vehicle and modifications that you perform are other factors that may affect your car insurance rates.

Your Vehicle Make and Model

Insurance companies use internal data to see trends across different vehicles. For example, an insurer who sees that sports cars are more likely to be pulled over for speeding or involved in an accident will charge higher rates for drivers with sports cars.

Additionally, the make and model of your vehicle might put you at an increased risk of having your car stolen. Cars deemed a higher risk will have higher insurance premiums. Insurance companies also think about how much the vehicle will cost to repair. A more expensive car will cost more to repair than a budget model, so the premium will be higher.

Does Your Car Have a Catalytic Converter?

Ask your insurance provider whether they will cover the cost of a stolen catalytic converter (if your car has one). With rates of theft remaining high, this may be something you want to make sure is covered under your policy.

Your Vehicle Modifications

Vehicle modifications can include anything from installing an antitheft device to lowering your suspension. Any time you change your vehicle or use aftermarket parts, you need to add an endorsement to your car insurance policy or invest in a custom policy.

Modified cars are more expensive than non-modified ones, which increases the repair cost for your insurance company. Minor modifications have little influence, but structural mods and expensive modifications do. Speak to your insurance company before making any modifications to learn how your policy will change.

Your Vehicle Customization

Add-on features like backup cameras and lane sensors are susceptible to damage in collisions. If you install additional features when customizing your vehicle, expect to pay for them in your insurance rates.

Your Vehicle Safety Features

Many drivers assume safety features lower the cost of car insurance, but that is not always the case. Expensive safety features like backup cameras cost more to repair, so you might see an increase instead of a decrease.

Other Factors that Affect Car Insurance Rates

  • Your auto insurance company: Rates will differ depending on which insurance company you choose. This is why it's important to compare rates before signing up for a plan.
  • Type of insurance coverage: There are several different types of insurance coverage, such as comprehensive coverage, collision coverage, auto liability coverage, and more. The type of coverage is going to influence your monthly cost.
  • Coverage limits: When choosing your plan, you'll be able to choose how much you're covered for (i.e., how much your insurance company pays in the event of a car insurance claim). The higher your limits, the higher your premiums will be.
  • Your deductible: Your deductible is the amount you'll need to pay out of pocket before your insurance kicks in. For example, if you have a $500 deductible, you'll need to pay $500 towards repair costs before your insurance company pays. To save on your monthly premiums, you should increase your deductible.

Frequently Asked Questions

Does lowering my car affect my car insurance rates?

Lowering your vehicle is a type of modification that drops the suspension, so the car sits closer to the ground. If not done by a professional, a lowered suspension leads to greater damage to other parts of the vehicle.

Cars with a lower suspension struggle when going over speed bumps and can sustain permanent damage from bottoming out. A lower suspension increases the likelihood of accidents and significant damage from any type of car crash, so car insurance premiums rise.

Do you pay more insurance if you have a red car?

One of the most common rumors about car insurance is that red cars cost more to insure. The make and model of your vehicle impact the premium, but the color of your car does not affect the amount you pay.

According to American Auto Insurance, red cars do tend to get pulled over more than other vehicles, but not more than white cars. Getting pulled over and receiving a ticket will likely affect your car insurance rates.

Can I get car insurance with a mod exhaust?

Any modifications made to a vehicle change how car insurance companies price the premium. Performance modifications, including to the exhaust, strut bars, suspension, or engine, increase the premium.

Some insurance companies refuse to insure modified cars if they have expensive modifications like engine performance enhancement. In that case, you will need to purchase supplemental coverage or classic car insurance that is customized to your vehicle. Always speak with your insurance company before modifying your car. Not doing so compromises your coverage.

How can I lower my car insurance?

There are many ways to lower your car insurance rate. Some of the most popular include bundling multiple policies, taking defensive driving courses, having a clean driving record, and using discounts like veteran benefits and senior discounts. Learn more about lowering your auto insurance rates in 14 different ways.


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