3 Auto Insurance Premium Factors You Can’t Ignore

Your auto insurance rates are affected by many factors, including, (1) your driving record, (2) your credit history, (3) your age, and (4) where you live.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Jul 16, 2021

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Things to Remember...

  • Many different factors work together when calculating your insurance premium
  • Your driving record can significantly impact you both negatively and positively
  • Discounts are available for students and those who purchase multiple policies from the same carrier

Regardless of where you live, auto insurance can be extremely expensive. The type of car you drive, your driving record, and where you live are all taken into account to calculate your auto insurance premium.

And if you don’t stay on top of the situation, you may pay more than you need to. However, there are a few steps you can take to lower your auto insurance premium and save a lot of money.

Enter your zip code above into our FREE toolbox to find the lowest possible auto insurance rates and premiums now!

Understanding Auto Insurance Rates

According to an article published by the Insurance Information Institute, the average cost of owning an automobile went up in 2011. For instance, it cost $8,946 to own and operate a sedan in 2011, which equates a 1.9 percent increase over the past year.

Given the poor state of the economy and rising inflation, it is important to save money wherever possible, including your car insurance premium.

According to the National Association of Insurance Commissioners, most states have made automobile insurance mandatory or need the driver to provide proof of financial responsibility.

An insurance policy is a legal contract between the insurance company and the driver. As part of this legal contract, the driver is expected to pay a set amount to help cover the risk the car insurance company is taking by insuring her or him. This set amount is the auto insurance premium.

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Enter your ZIP code below to view companies that have cheap auto insurance rates.

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Free Auto Insurance Comparison

Enter your ZIP code below to view companies that have cheap auto insurance rates.

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Calculating Auto Insurance Rates

The South Carolina Department of Insurance states that every insurance company has its own method of determining auto insurance premiums and rates.

Insurance companies use underwriters to assess the risk associated with the applicant based on a number of factors such as demographic information, vehicle information, as well as, driving and credit history.

Based on the underwriting, the profile is then assigned a rating that indicates the cost to the insurance company if they were to offer the driver insurance policy.

Driving Record

Your driving record is possibly the most important factor in determining your auto insurance premium. If your driving record shows you having an at-fault accident, moving violations, speeding tickets, or reckless driving, you are considered a high-risk driver.

This will automatically raise your premium. Indeed, some auto insurance companies will penalize you for a number of years from the day of the driving violation.

For instance, the Merit Rating Board of The Massachusetts Department of Transportation keeps driving records of traffic violations, at-fault and comprehensive insurance claims, and out-of-state driving records, which it regularly reports to Massachusetts auto insurers.

Where You Live and Drive

Your place of residence is an important aspect that determines your auto insurance premium. For instance, certain states have a higher incidence of catastrophic natural disasters such as hurricanes, earthquakes, or tornadoes.

The volume of traffic where you live is also an important factor. If you live in a high traffic urban area, you are likely to have a higher premium as compared to someone living in a residential suburb or rural zone.

Other geographic factors include crime rates, especially car thefts and vandalism incidents in your area, the data about the number of uninsured drivers, and the state laws regulating automobile insurance.

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Type of Car

Auto insurance companies determine your premium depending on the car you drive or plan to buy. The make, age, and model of your vehicle can create a huge difference in your premium. If you are driving an expensive, late model car, your premium will be higher.

Every automobile is given a numeric symbol that indicates the risk factor for the insurance company.

Besides the year, make, and model, other factors, such as the color, safety features, and crash information from the Insurance Institute for Highway Safety, are used to codify the insurance risk.

Other Factors that Determine Your Premium

Calculating car insurance premiums can be a complicated process. Besides the factors mentioned above, there are a number of other elements that influence your car insurance rate and premium amount.

Some of the other factors are as follows:

  • Your age
  • Gender
  • Marital status

It might seem unfair to be penalized for being a certain age, sex, or relationship status, but it does happen. Drivers under the age of 25 and in the retirement age range are considered higher risks and are likely to pay higher premiums. Women are considered safer drivers and pay less, as do married individuals.

Credit Rating

Your credit rating also plays a role in calculating your insurance premium. Since a higher credit rating signifies financial responsibility and the ability to pay your bills on time, auto insurance companies welcome and reward such customers.

In addition to your credit rating, car insurance generally offer discounts for low mileage. If you have low mileage on your car, you are likely to get a discount. Car insurance companies figure that if you are not driving a lot, the likelihood of accidents is lower.

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Your occupation has an impact on your premium. Certain professions such as doctors, professors, engineers, and teachers are considered lower risks. They usually have lower premiums than construction workers, contractors, and newspaper delivery persons, since the latter is on the road a lot more.

Helpful Tips to Lower Your Rates

As living and insurance costs continue to rise, it becomes important to find ways to lower your auto insurance premiums. It is possible to save money on insurance premiums if you perform due diligence.

Like most purchases, look at different companies and get auto insurance quotes from them. Make sure you compare all the elements of the different quotes before making a final decision.

Insurance companies regularly offer discounts to attract new customers, so be sure to inquire how they apply to you. There are many types of discounts available including loyalty discounts, good student, good driver, and safety specific discounts. Drivers can bundle offered discounts for some substantial savings.

Safety First

Some insurance companies offer monitoring devices that use GPS technology to create a driving record. If you drive safely and avoid actions such as sudden stops, a sharp acceleration, or dangerous turns, you might meet the criteria for safe driving and get a reduced insurance rate.

There are many ways to get auto insurance. Whether you are comfortable talking to someone on the phone or scouring the depth of the Internet, the bottom line is to cover all your bases and get the best quotes possible for all the insurance coverage you need.

One of the easiest ways to find low-cost car insurance is to enter your zipcode below and use our FREE search tool on this page!

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Enter your ZIP code below to view companies that have cheap auto insurance rates.

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