What impacts your car insurance rates?

If you own a vehicle, car insurance is mandatory. However, the rate you pay for car insurance isn’t. Auto insurance premiums are often the result of various elements – and fortunately, many of them are within your control. These are some of the factors that go into determining how much you’ll pay for car insurance.

Credit score

Your credit score isn’t just important for that car loan – it’s also a determining factor when you apply for car insurance. “All states except California utilize credit as a means of determining risk, and if all things are the same when quoting insurance on two different people, credit can easily double the cost if you have a poor credit history,” 

Location

Every aspect of your location plays a role in determining your premium amount, from your state to your city and even down to your ZIP code. According to Espenschied, 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 says.

So, why do rates vary so much by state? Different states have different rules regarding both the type of insurance and minimum liability amount they require. “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.”

But that’s not the only reason your insurance may vary depending on location. “Drivers who live in an area with severe weather may be charged larger premiums,” according to Jeff Briglia, Chief Insurance Officer at Metromile in San Francisco, CA. For example, the NICB reported that more than 422,000 insured vehicles were damaged by Hurricane Harvey; there were 300,000 claims after Hurricane Katrina, and 250,500 following Superstorm Sandy.

And your car insurance rates can also be affected by another location factor. According to Moore, your garaging ZIP code provides details of population size which can impact the likelihood of thefts and accidents.

Prior insurance

Your insurance history affects your car insurance rates in two separate ways. Prior insurance shows that you’ve continually maintained insurance – which is required by every state but New Hampshire, according to Espenschied. “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.”

Driving record

But even with a long insurance history, careless driving habits can negatively impact your premiums. “Understandably, if you’re an accident-prone driver, there’s a greater chance you’ll make an insurance claim, making you expensive to insure,”  according to Fabio Faschi, property & casualty team lead at Policygenius in New York, NY. “But if you haven’t been in an accident or had to make a claim, or even have made very few (and you don’t have DUIs), you are classified as a low-risk driver and charged lower rates.”

Age and gender

During your lifetime as a driver, your rates will go up, come down and go back up – based solely on your age. Teen drivers have four times as many crashes as drivers who are 20 or older. 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 and young men are less likely to wear seatbelts, and more likely to buy faster vehicles and speed. “Men typically have higher premiums than women, especially in the under 25 category,” according to Moore. “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,” she says. When asked why, Moore says that studies show older drivers have a slower reaction time and decreased vision, causing more claims.

Vehicle

You would probably expect a new vehicle to cost more to ensure than an older one, but it’s not that simple. “Newer cars are more complicated to build, which means they’re harder to repair and more expensive to insure,” says Faschi.  On the other hand, a newer car can be cheaper for other reasons. “For example, if you replace a 2012 model year with a 2019 model year that has more safety features, the premium would often be lower,”