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9 Key Factors That Impact Your Car Insurance Rate

Published November 15, 2021
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Contrary to popular belief, It's not just the crashes that count when your car insurance premium gets determined by your insurance provider. Insurers consider all of the information they have about you and evaluate the amount of risk that is associated with insuring you. The riskier that you are perceived, the higher the rate will be.

In an effort to keep your insurance rates as low as possible, it's important that you understand what goes into your car insurance rate. Here's a list of nine key factors that can impact your premium, as well as tips on how to manage the ones that are within your control.

Getting into an accident (at-fault or not at-fault)

We all know that after an at-fault accident, your premiums are likely to go up. Your car insurance company assigns a risk factor to the policyholder who was in the accident and this can affect everyone on that policy. In addition, if you were found liable for the other driver's damages from the accident, this will add a mark against you, as well.

However, some people might be surprised to hear that even if you were not responsible for an accident, the mere fact you were involved in one could also bump up your car insurance rate.

Your insurance company might still view you as a risk because of the possibility that you may get into another accident in the future. Some car insurance companies might ask for more information after an incident, such as seeking out eyewitnesses to get another perspective on what happened.

If their investigation shows your driving was less than ideal, then they could charge you more for your premiums, even if you were not at fault.

Saying "I Do"

Many insurance companies charge lower premiums to married people because statistics show that they are less likely to be involved in accidents than those who are single, separated, divorced, or widowed. If you recently got married, congratulations! Don't forget to let your insurance provider know.

Moving to a different location

Another major factor affecting your car insurance rate is the location you live in. Insurance companies evaluate the risk you possess and base premium rates based on where you live and the conditions of that location.

If you live in a city or urban area, car insurance companies might charge you higher premiums as a way to compensate for the higher risks associated with populated areas, such as car theft, vandalism, and accidents.

Alternatively, if you live in a rural area, you might be charged lower premiums because such risks are less common. As a rule of thumb, the fewer numbers of people living in a specific area, the less risk it poses to insurers.

factors that affect car insurance rate

Unfavorable credit score and history

Your credit score and history can make a big difference when it comes to determining how much you pay for your car.

If you have a bad credit score or your credit history is poor, your car insurance premiums will be much higher than those who have good scores and a strong track record of credit responsibility. Alternatively, if you have a great credit score and history, you could qualify for insurance discounts.

Keep in mind that the states of California, Hawaii, Massachusetts, Michigan, and Washington forbid the practice of using credit as a factor in determining car insurance rates.

Car make and model

The type of car you drive also matters when insurers assess your car insurance premium. If you happen to own a luxury car such as Mercedes Benz, BMW, or Lexus, it will cost more for you to insure your vehicle than if you had an average economy model.

Insurance companies do this because these cars often require special service and mechanical parts, making them more expensive to repair in the event of an accident.

Insurers will also evaluate the make and model of your car when determining insurance rates as certain cars are viewed as more dangerous than others, such as sports cars that can go from 0 to 60 in just a few seconds.

Driving record

Car insurance companies use your driving history to determine what kind of risks you pose to them, so they can charge an appropriate price for the coverage you need. The number one thing you can do to avoid paying more for car insurance is to drive safely and obey the rules of the road.

The more accidents, speeding tickets, and DUIs you have, the higher your insurance rate will be. In some cases, a single speeding ticket or accident could increase your monthly premiums by hundreds of dollars!

Gender

In most states, your gender also plays a role in car insurance premiums. For example, older males tend to pay a little less than older females.

Car insurance premiums show the most discrepancy between males and females during their teenage years. The main reason for this is that statistically speaking, young males tend to be much more aggressive drivers than young females and are more likely to be involved in car accidents during this period of life.

Age

The driver's age is an important factor insurers consider when determining your car insurance rate. Teenagers and young adults can expect to pay more for their premiums as their inexperience on the road may cause them to have more accidents.

Don't worry, though - once you turn 25, insurance companies take a look at how you've been driving and start to lower your premiums.

That being said, premiums tend to go up again after the age of 65 as the risk of having an accident starts to increase.

Coverage history

Insurance companies can also use your coverage history to determine how much you pay for your car insurance.

If there is a gap in your coverage, especially while still owning a car, insurers may view you as a higher risk and increase your premiums or even deny you coverage altogether. Instead of canceling your insurance, consider freezing your account or opting for less coverage.

Things you can do to improve your car insurance rate

There are several factors that go into determining how insurance companies perceive you as a driver, some of which are within your control. Let's go over some ways to keep car insurance rates low.

Keep your insurance carrier informed

If you want to avoid car insurance premium increases, the best thing to do is keep car insurance companies up-to-date with any changes in your circumstances.

If car insurance premiums go up for reasons beyond your control, be sure to give the car insurance company a call so they can help you out and take another look at what information they have on file about you.

Improve your credit score

One of the quickest ways to reduce your cost of insurance is to improve your credit score. Many insurers check a customer's credit scores and use them as a factor in determining rates. Customers with lower credit scores will typically pay higher insurance rates than those who have higher credit scores.

Some of the things you can do to improve your credit are to pay your bills on time, 100% in full, eliminate as much debt as possible, and improve your credit utilization score by spending less than 10% of your available credit.

Look into available discounts

Car insurance companies offer discounts that car owners may qualify for. Discounts are typically offered for car owners who have sophisticated car safety features installed, bundle their cars with the same carrier, have a clean driving record, etc. Be sure to inquire about available discounts with your car insurance provider to maximize your premium savings.

Increase your deductibles

Another way to get lower car insurance premiums is by choosing higher deductibles. If you have the financial means to pay a little more out of your pocket after a claim, choosing a higher deductible will result in cheaper premiums. Then, if you don't make a claim, you'll be ahead by default.

Pay the full policy term up front

If you are able to pay the full policy term up-front, rather than in monthly payments, insurance companies will often give you a discount on your car insurance premium.

Shop around for another insurance

Not all insurers are created equal. An insurer that is the most affordable in one state could be the most expensive in another state. Be sure to shop around every now and compare car insurance rates from several providers and receive personalized quotes for your specific needs.

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