15 Factors that Determine Your Auto Insurance Rates (Updated + Data)

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Things to remember...
  • Understanding how car insurance is calculated can help you learn how to save money
  • You can control some of the factors that go into your rate, but others you can’t control
  • There are ways to save money on car insurance

If you drive, you’d better have car insurance! It’s the law pretty much everywhere in the U.S. except in a few states where, if you’re independently wealthy and can prove your financial responsibility, you can forego insurance.

The average person needs car insurance no matter where they live in America.

Everyone would like to save money while retaining the appropriate level of coverage for their situation. By understanding the factors involved in calculating your car insurance premiums, you can take steps to get lower rates without having to sacrifice your policy.

An easy step you can take to find out if you could be getting better rates is to compare quotes. We have a tool above in which you can compare multiple car insurance quotes at once. Enter your zip code to get started!

Here’s what we cover:

15 Factors that Affect Car Insurance Rates

Car insurance rates are calculated by actuaries. Purdue Department of Mathematics defines the professional:

An actuary is a business professional who analyzes the financial consequences of risk. Actuaries use mathematics, statistics, and financial theory to study uncertain future events, especially those of concern to insurance and pension programs.

Essentially, the actuaries calculate how much risk you pose to the insurance company and the company then charges you enough so that they stand to make a profit.

If you’re not seen as a huge financial risk, you’ll pay lower premiums. If their actuarial model puts you at a high-risk, you’ll be charged higher rates so that the insurance company is able to protect their risk in taking you on as a client.

Not every insurance company uses all of these factors, and every company develops their own way to calculate risk so while you may be viewed as a moderate risk by a certain insurer, another may place you in the low-risk category.

Below is a list of factors that go into the calculation of your specific risk.

Now, whether or not you want to change these factors is up to you, but you do have an element of control over the following:

#1 – Where you live

This factor affects rates in a couple different ways:

  • Your state’s requirements and general risk
  • Your zip code

PR Newswire lists the most expensive states for insurance as:

  • Florida
  • Louisiana
  • Michigan
  • New Jersey
  • New York

Depending on what data is considered in the calculation, any one of these five could be considered the most expensive. In Florida, Michigan, and New York, the type and level of coverage required is the major reason the rates so high. These states require “no-fault” coverage.

So in addition to paying for standard liability coverage that required almost everywhere, residents are required to pay for varying levels of self-protection coverage.

Louisianna residents pay so much for coverage because of natural disaster risk and poorly maintained roads.

New Jersey’s rates are high because, in addition to no-fault coverage being required, there is a high rate of accidents.

Each state’s bottom line for insurance coverage premiums is governed by how much insurance is required to be purchased and how much overall insurance risk there is in the state whether it’s due to accidents, vandalism, or weather.

Your zip code also plays a significant role in your premiums and can sway your costs by up to 82 percent. Certain urban areas have a higher risk of vandalism and theft, there may also be an increased rate of car accidents in certain areas.

For instance, the states below represent the highest and lowest risk for vehicle theft which would also affect insurance.

– 10 States With the Lowest Vehicle Theft Rates Per 100,000 Residents

State:Rate per 100,000 Residents:
#10 - Idaho123.2
#9 - West Virginia121.7
#8 - Virginia116.4
#7 - Massachusetts115.8
#6 - Pennsylvania101.5
#5 - Mississippi100.4
#4 - New York72.6
#3 - New Hampshire62.5
#2 - Maine58.2
#1 - Vermont45.1

– 10 States With the Highest Vehicle Theft Rates Per 100,000 Residents

State:Rate per 100,000 Residents:
#10 - Oklahoma307.9
#9 - Oregon313.6
#8 - Colorado352.9
#7 - Hawaii395.8
#6 - Alaska411
#5 - D.C.436.5
#4 - Washington442.6
#3 - Nevada448.3
#2 - California450.3
#1 - New Mexico559.2

View all data here.

#2 – Your marital status

According to a study done by The National Institutes of Health, drivers who were never married have a significantly higher rate of motor vehicle crash injuries than drivers who were married.

Higher risk equals higher premiums, so single drivers often end up paying more for car insurance. State Farm offers lower rates when a customer gets married, and they state that men under 25 years old will see an even more significant rate drop than other drivers.

According to Consumer Reports, a couple in their 30s who marries can save a combined average of $525 on car insurance a year.

#3 – Your driving history

Your driving history is one of the biggest indicators of your future driving risk. If you have a couple of at-fault crashes on your record, you’ll pose more of a risk to the insurance company and you’ll pay more for coverage.

Probably the worst driving-related thing you can do for your coverage costs is to get a DUI conviction. Typically your coverage costs will increase by a few hundred dollars after a DUI.

You can’t actually change history, obviously, but you can change how you drive now so that in a couple years your history will look different.

#4 – The kind of car you drive

Picture a minivan driver. Now, picture a sports car driver.

You probably just stereotyped your mental image, and while not every minivan driver is a middle-aged woman, and not every sports car driver is a young male, these stereotypes have an element of reality as their basis, and car insurance costs reflect that.

The Honda Odyssey is the least expensive vehicle to insure. Not only do drivers of minivans tend to be safer than other drivers, but the Odyssey is one of the safest vehicles for occupants, indicating a lower risk of injury costs for the insurance company.

Cars that cost a lot of money to repair and vehicles that are statistically more likely to be involved in accidents cost the most to insure.

#5 – The number of miles you drive

More miles driven mean more opportunities to have an accident. So, people that drive a high number of miles a year will pay more than if they travel few miles.

Some insurance companies give low mileage drivers lower rates but with other companies, not much rate difference can be observed.

There are some insurance plans that are based on mileage. If you opt for that type of insurance, and you drive few annual miles — usually between 5,000 and 10,000 annual miles — you’ll probably see a significantly lower car insurance bill than you would with a traditional plan.

#6 – Your credit history

Once again, like your driving history, the past is what it is, but you can change your credit habits now for future benefits.

Your insurance credit score is different than your FICO credit score but both are based on the same credit information. Your insurance credit score is used by insurance companies to predict the risk that you will file a claim.

A lower score equals more risk to the insurer which equals higher premiums for the consumer.

#7 – Occupation

Although banned in some states (eg Massachusets and New York), many other states factor what you do for a living into your car insurance premium.

According to Clark.com, the following occupations represent low and high insurance risk:

Low RiskHigh Risk
AccountantsDaycare employees
DentistsStock clerks
EngineersBank tellers
Military OfficersRetail Workers
Teachers

#8 – Education

This factor goes hand-in-hand with occupation, and in states where occupation is banned from being factored into rates, education level is banned as well.

Despite car insurance actuaries being able to prove education’s statistical relation to risk, some states have determined that these calculations are discriminatory.

Where education level is considered, Consumer Reports states that a college degree can help you save $90 a year compared to someone who didn’t finish high school.

#9 – Your gender

How your gender affects your car insurance rates depends on where you live and what insurance company is making the calculations.

Some states do not allow gender to be calculated into rates (Montana) and some companies don’t consider it. But sometimes there’s a clear difference between what men and women pay.

Traditional insurance theory says the gender and age combination that typically receives the highest car insurance rates is males under 25 years old. They are statistically more likely to be involved in a motor vehicle accident than any other age/gender classification, so they’re more likely to be charged more for insurance.

On the flip side, for all ages, women take fewer risks while driving and are rewarded by lower premiums.

However, in our research we found some interesting difference from the traditional theory.

– States Where Women Pay More

StateRate IncreaseStateRate Increase
Alaska7.7%Arizona
6.6%
Arkansas20.5%California0.7%
Colorado17.1%Delaware31.6%
District of Columbia10.9%Florida11.7%
Georgia26.9%Idaho5.7%
Illinois11.5%Indiana7.9%
Iowa14.4%Kansas7.4%
Kentucky12.8%Louisiana17.5%
Maryland14.5%Michigan21.8%
Minnesota50.7%Mississippi1.1%
Missouri12.2%Nebraska7.3%
Nevada8.2%New Hampshire9.1%
New Jersey16.4%New Mexico16.3%
New York14.5%North Dakota10.5%
Ohio6.1%Oklahoma8.2%
Oregon10.2%Rhode Island3.3%
South Carolina4.6%South Dakota4.7%
Tennessee1.8%Texas11.7%
Utah7.5%Vermont4%
Virginia3.4%Washington18.5%
West Virginia25.1%Wisconsin5.9%
Wyoming2.7%

– States Where Men Pay More

State: Rate Increase:
Alabama15.3%
Connecticut5.1%
Maine6.6%
Massachusetts11.2%
Montana1.2%

Our team plans to do more research with different ages and driving history to further investigate. View all our data here.

#10 – Your age

When you’re a teen or in your early 20s, it’s impossible to have had many years of driving experience. Lack of experience is the biggest cause of teen driving accidents, so a young driver will pay more than an older driver who has more years of driving under their belt.

Senior drivers may see their rates increase as their risk of being involved in fender benders increases.

State:Worst
Age Group:
Percent of all
Fatal Crashes:
Alabama30-3411.46
Alaska20-2415.74
Arizona20-2412.78
Arkansas25-2911.23
California20-2415.14
Colorado20-2413.41
Connecticut20-2412.38
Delaware20-2414.71
District of Columbia30-3428.95
Florida20-2413.28
Georgia20-2411.95
Hawaii20-2415.03
Idaho20-2412.46
Illinois25-2912.13
Indiana20-2413.35
Iowa20-2411.99
Kansas20-2410.43
Kentucky20-2411.57
Louisiana25-2913.21
Maine30-3410.68
Maryland25-2913.09
Massachusetts20-2415.77
Michigan20-2412.08
Minnesota20-2410.09
Mississippi20-2412.24
Missouri20-2411.34
Montana55-5911.32
Nebraska20-2413.58
Nevada20-2413.20
New Hampshire20-2415.03
New Jersey20-2413.32
New Mexico20-2415.17
New York25-2912.79
North Carolina20-2411.83
North Dakota45-4910.87
Ohio25-2910.28
Oklahoma30-3411.87
Oregon20-2411.75
Pennsylvania20-2411.34
Rhode Island20-2419.70
South Carolina25-2912.46
South Dakota19 and under13.77
Tennessee20-2411.37
Texas20-2413.24
Utah20-2411.94
Vermont20-2422.08
Virginia20-2411.70
Washington20-2412.29
West Virginia20-2412.85
Wisconsin20-2412.42
Wyoming25-2913.25

View all data here.

#11 – Number of years driving

Very similar to age playing a role in car insurance quotes, the number of years you’ve been driving indicates your level of experience. The longer you’ve been driving, the more experience you’ve gained and the lower your insurance costs can become.

The policy you choose will make a difference in how much you pay for coverage in the following ways.

#12 – The type of policy

The bare minimum insurance coverage required by your state of residence is called “basic coverage.” In tort states, where the at-fault party must be responsible for all accident-related costs, this coverage includes just liability protection.

Basic coverage is the cheapest car insurance option, and it will not provide any benefits for damage incurred by the at-fault driver.

A more expensive option is adding comprehensive and collision to basic liability (see table in the next section). These types of coverage will cover your own damages after you’re at fault in an accident or other events like hitting an animal or a natural disaster.

Because your insurance company stands to lose more if you crash, you’ll pay more for this coverage, but you will be better protected.

If you have a loan or lease, you’ll be required to purchase more coverage. If you own your vehicle outright, you can decide which option is right for you.

#13 – The level of coverage

Even if you decide to purchase only liability coverage, you may wish to purchase higher levels than your state’s requirements.

Purchasing higher limits will cost more, but most of the time, the price increase will be insignificant when compared to the protection increase.

Most experts recommend increasing bodily injury liability coverage from what your state requires (somewhere around $20,000 per person, $40,000 per accident) to $100,000 per person and $300,000 per accident.

In addition to a full coverage policy, there are many additional protections you may wish to add:

Coverage ConsiderationsDescription
LiabilityMost states require you set amount of liability coverage which protects other drivers in the case of an accident
ComprehensiveThis coverage and collision coverage are typically required by your lender or lease holder. If you own your vehicle outright, this is an optional coverage. It will pay for damage from non-accident related events such as hail, vandalism, and theft.
CollisionThis provides financial protection for your vehicle. It will pay for damages after a crash.
Personal Injury Protection (PIP)This coverage will pay for your own medical costs including lost wages.
Medical Payments (MedPay)Similar to PIP, MedPay covers injury costs but doesn't cover lost wages like PIP does.
Uninsured/Underinsured Motorist ProtectionInsurance companies are required to offer this coverage to you and it will pay for your own damages beyond what another's liability covers when they're responsible for an accident.
Guaranteed Auto Protection (GAP)You may owe more on your vehicle than it's worth because of how quickly cars depreciate. This coverage will pay the difference between the value and what you owe if your vehicle is totaled.
Personal Umbrella Policy (PUP)This option provides an "umbrella" of coverage over several types of insurance.
Rental ReimbursementIf your car is a total loss or needs repair, do you have another vehicle you can drive? If you'll need a rental, you should consider this option.
Emergency Roadside AssistanceYou can purchase this option from your insurer or a driving club.
Pay-As-You-Drive or Usage-Based InsuranceThis isn't a good choice for everyone, but if you drive few miles, it might be cheaper for you to purchase this kind of coverage.
Non-Owner Car InsuranceThis option is for people who do not own a car but borrow one occasionally.
Modified Car Insurance CoverageIf you've made modifications to your vehicle, your regular full coverage won't take those changes into consideration when paying for damages. Adding special coverage for those modifications will protect the value of them.
Windshield CoverageWindshield coverage will help you pay for the replacement of your broken glass (check state laws for specifics)
Mechanical Breakdown InsuranceThis coverage is similar to a manufacturer extended warranty and you should weight the benefits of both a warranty and breakdown insurance to see which is best for you.

More coverage always results in more costs. You can weight the costs with the benefits to find the level of coverage right for your situation.

#14 – The discounts available

Discounts will help you save money from the base policy rate. Below are some of the common discounts. How much savings each discount offers depends on the company offering the discount. These won’t be offered by every insurer, but they are fairly standard:

Vehicle Discounts:Driver/Customer Discounts:Personal Discounts:
Active Disabling DeviceClaim FreeEmergency Deployment
Adaptive Cruise ControlContinuous CoverageFamily Legacy
Adaptive HeadlightsDefensive DriverFamily Plan
Anti-Lock BrakesDriver's EducationFederal Employee
Audible AlarmDriving Device/AppFurther Education
Automatic BrakingEarly SigningGood Student
Blind Spot WarningFull PaymentHomeowner
Daytime Running LightsGood CreditLife Insurance
Economy VehicleLoyaltyMarried
Electronic Stability ControlMultiple PoliciesMembership/Group
Farm/Ranch VehicleMultiple VehiclesMilitary
Forward Collision WarningNew Customer/New PlanNew Address
Garaging/StoringOccasional OperatorNew Graduate
Green/Hyrbid VehicleOnline ShopperNon-Smoker/Non-Drinker
Lane Departure WarningOn-Time PaymentsOccupation
Newer VehiclePaperless/Auto BillingRecent Retirees
Passive RestraintPaperless DocumentsStable Residence
Utility VehicleRoadside AssistanceStudent Away
Vehicle RecoverySafe DriverStudent or Alumni
VIN EtchingSeat Belt UseVolunteer

View all data here.

#15 – The deductible

This factor only applies to you if you have full coverage. Liability coverage doesn’t include a deductible, but first party benefits (full coverage policies) do.

A deductible is a predetermined amount that you will have to pay before your full coverage benefits kick in. Five hundred dollars is a fairly standard deductible. If you raise your deductible to $1000, you must be willing and able to pay that amount before you receive compensation from your insurer.

If you choose a $1000 deductible, your monthly premium will be lower than if you choose a $500 deductible. If you have the money and are willing to take the risk, raising the deductible is a great way to save money.

Factors that Won’t be Considered

There are some factors that are universally illegal to be calculated into your car insurance rate.

The following are universally banned from being used to calculate your car insurance premiums:

  • Your race
  • Your religion

It has come to light, recently, in a Consumer Reports analysis, that people who live in minority neighborhoods pay more – up to 30 percent – for car insurance than those in white neighborhoods. This report has led many states to reevaluate their discrimination laws regarding car insurance.

The Insurance Information Institute disputes the finding because the study did not take into account other factors.

Discrimination in car insurance based on a person’s race or religion is definitely prohibited.

3 Proven Strategies to Find Cheap Car Insurance

Saving money while maintaining adequate coverage should be your goal, and the following tips can help you do just that.

#1 – Shop Around

One of the easiest steps you can take to get car insurance at a lower price is to shop around for coverage. This page has a comparison tool that will allow you to enter your information one time and then will generate quotes from several different insurance companies.

Once you see how much switching providers could save you, you can do a little more research into the companies you’re considering to make sure they’re financially sound and have a good customer satisfaction rating. You may be able to save hundreds of dollars a year by switching companies.

#2 – Combine Policies

Another great way to save is to combine policies within a company. If you have more than one vehicle, see how much you could save by insuring the vehicles with the same company and then adding homeowners or renters insurance.

#3 – Rethink Your Coverage

Consider dropping full coverage from an older vehicle. If the cost of full coverage annually is more than 10 percent of your vehicle’s value, most experts recommend dropping the coverage.

Find out from your insurance company what changing your deductible will do for your monthly premiums. If you stand to save a lot, you may decide to risk having a higher deductible.

Understanding what factors are used in determining your car insurance rates can help you see what you can do to save money. You can get started on the road to finding savings by entering your zip code below and comparing car insurance quotes.

References:
  1. https://www.math.purdue.edu/academic/actuary/what.php?p=what
  2. https://www.prnewswire.com/news-releases/top-5-most-expensive-states-for-auto-insurance-300540650.html
  3. https://www.iii.org/article/background-on-no-fault-auto-insurance
  4. https://www.cbsnews.com/news/car-insurance-are-you-in-a-high-cost-zip-code/
  5. https://docs.google.com/spreadsheets/d/17AL3_bJ-HyqSRQg0K9NekB_agjeueYqkcD4YU1woFTU/edit#gid=1984941808
  6. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1756540/
  7. https://www.statefarm.com/customer-care/life-events/getting-married
  8. https://www.consumerreports.org/car-insurance/car-insurance-rates-milestones-that-can-change/
  9. https://www.esurance.com/info/car/how-a-dui-affects-car-insurance-premiums
  10. https://cars.usnews.com/cars-trucks/least-expensive-vehicles-to-insure
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  12. https://www.progressive.com/answers/how-mileage-impacts-insurance/
  13. https://www.consumerreports.org/cro/car-insurance/auto-insurance-special-report/index.htm
  14. https://www.iii.org/article/what-does-my-credit-rating-have-do-purchasing-insurance-1
  15. https://www.carinsurancecomparison.com/car-insurance-occupation/
  16. https://clark.com/insurance/professions-lower-auto-insurance-rates/
  17. https://www.wsj.com/articles/what-car-insurers-cant-ask-you-when-setting-your-rates-1513170000
  18. https://www.cnbc.com/2014/04/10/these-people-pay-the-most-for-auto-insurance.html
  19. https://www.esurance.com/info/car/why-women-pay-less-for-car-insurance
  20. https://docs.google.com/spreadsheets/u/1/d/1MyeiJGxi0Hbqn0XxuTzdcnkulrBsBwj5sVV7o8LZJjs/edit#gid=0
  21. https://www.ncbi.nlm.nih.gov/books/NBK9672/
  22. https://docs.google.com/spreadsheets/d/15U_C6z7sy9O1q6gjRx63kAE4ozMn5PcSVhTkAY9lK4w/edit?usp=sharing
  23. http://guides.wsj.com/personal-finance/insurance/how-much-car-insurance-do-you-need/
  24. https://docs.google.com/spreadsheets/d/1CdRhDJEXQQKHU6ueWizprhDf7G0ukKiLi_R_AXL_t0c/edit#gid=0
  25. http://www.21st.com/insurance-newsletters/2013/02/how-to-choose-your-deductible.htm
  26. https://www.iii.org/article/what-determines-price-my-auto-insurance-policy
  27. https://www.cbsnews.com/news/are-car-insurers-discriminating-against-minorities/
  28. https://clark.com/cars/do-you-need-full-coverage-or-just-liability-insura/

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