premiums based on the estimated risk associated with a policy. To set your rate, they’ll ask for information about you, your car, your driving history, and your desired policy coverage.

12 factors insurance companies use to set your rates

When you buy an insurance policy, you volunteer certain information to your insurance company, and your insurance company will use that information to set your auto insurance rates.

Our experts have compiled a list of 12 factors that car insurance providers use to come up with car insurance estimates.

1. Driving record

When you request a quote or renew your policy with an auto insurance company, the insurer’s underwriters will look at your

Motor Vehicle Report (MVR)

—a comprehensive record of your recent or complete driving history.

Providers will add surcharges to your policy if they find any car accidents or traffic violations in the last three to five years, resulting in higher rates as long as the surcharge applies.

Our experts analyzed thousands of car insurance policies purchased by real Jerry drivers to determine how violations on your driving record can impact your average annual rate. Here’s what they found:

Violation	Average monthly rate	Percent increase over average
No violations	$144	Average
One DUI	$272	89%
One careless driving charge	$258	79%
One speeding ticket (all speeds)	$252	75%
One at-fault accident	$194	35%

2. Past coverage and claims

Insurance companies like to work with drivers who have had an auto insurance policy for a long time with few claims and no

lapses

. This is one of the reasons older drivers tend to pay less for insurance.

Prospective insurers will be able to see your claims history through something called a

CLUE report

. If you have a recent claim on your insurance—or if you dropped your coverage for a while—expect higher premiums for the next three to five years.

Here are some examples of just how much your monthly

full-coverage car insurance

rates might increase after a lapse in coverage:

Insurance company	Average coverage cost	Average coverage cost w/ lapse	Total cost increase (%)
AAA	$160	$208	30%
Allstate	$142	$190	34%
Clearcover	$98	$118	20%
Direct Auto	$167	$186	11%
National General	$148	$164	11%
Nationwide	$108	$136	26%
Progressive	$128	$159	24%
Safeco	$118	$145	23%
State Auto	$110	$153	39%
Travelers	$100	$140	40%

3. Age and driving experience

Insurance companies trust experienced drivers with a proven record of safe driving—and they reward that trust with less expensive premiums. Teen drivers, young drivers, and anyone with less than three years of driving experience can expect to pay higher rates due to the higher risk associated with their policy.

Here’s how much car insurance insurance can cost based on your age:

Age group	Minimum liability	Full coverage
Under 18	$275	$681
18–21	$248	$542
22–25	$163	$369
26–34	$123	$274
35–44	$110	$242
45–54	$106	$230
55–64	$100	$213
65 and up	$106	$214

Learn More:

The Best Cheap Car Insurance for Teens (2023)

4. Location

Insurers will check risk factors in your ZIP code when setting your rate. High rates of auto theft, vandalism, and traffic incidents will all raise the cost of insurance.

This is why urban drivers tend to pay more for coverage. Drivers in rural areas get into fewer accidents and can typically pay less for the same amount of coverage.

Savings tip:

Compare rates

in your area and check them against the average cost of coverage where you live.

5. Car make, model, and age

Your auto insurance rates depend heavily on your vehicle. In general, newer vehicles with high safety ratings have lower rates, while

luxury cars

sports cars

, and

older vehicles

without standard safety features all cost more to insure.

When buying a new car, check

NHTSA safety ratings

and

IIHS loss information

to keep your costs low.

The cheapest cars to insure on average are

compact crossover SUVs

. They typically have the lowest rates thanks to their sturdy build, excellent safety record, and affordable repair parts.

Learn more:

The cheapest cars to insure in 2024

6. Types of coverage and coverage limits

Most drivers need

full-coverage car insurance

, which includes some amount of

property damage liability

and bodily injury liability coverage along with

collision coverage

and

comprehensive coverage

Full coverage is more expensive than a state minimum policy that only includes

the coverage required by law

. But investing in full coverage is a good idea for anyone who owns a car worth more than about $4,000. Plus, full coverage is required by lenders for financed and leased vehicles.

Here’s what minimum liability and full-coverage insurance policies cost on average from some of the nation’s top insurance companies:

Insurance company	Minimum liability	Full coverage
AAA	$105	$215
Allstate	$85	$198
Bristol West	$158	$361
Clearcover	$66	$130
Founders	$51	$174
Gainsco	$98	$222
MAPFRE	$66	$205
National General	$93	$211
Nationwide	$61	$155
Progressive	$79	$178
Safe Auto	$122	$200
State Auto	$58	$162
Travelers	$59	$141

Your liability limits will also factor into your car insurance rate. A majority of states require drivers to purchase liability coverage limits of 25/50/25—meaning up to $25,000 for bodily injury to a single person, up to $50,000 for bodily injury from a single accident, and up to $25,000 for property damage costs from a single accident.

Higher liability limits, like 50/100/50 or 100/300/100, will increase your protection—but they will also add to your monthly premium. For most drivers, though, the added cost is worth it.

Here’s how much rates change on average based on drivers’ liability limits:

Provider	15/30/15	25/50/25	50/100/50	100/300/100
AAA	$175	$199	$262	$299
Allstate	$161	$193	$222	$245
Kemper Preferred	$63	$149	$181	$183
MAPFRE	$89	$100	$140	$203
National General	$116	$160	$216	$227
Nationwide	$117	$167	$181	$194
Progressive	$157	$158	$192	$198
Safeco	$140	$164	$179	$197
State Auto	$108	$169	$190	$210
Travelers	$164	$182	$208	$213

7. Optional coverage

Adding optional auto insurance coverages to your full-coverage insurance will also increase the price of your premium. In exchange, you will have more protection for you, your passengers, and your vehicle.

Here are some popular types of coverage that drivers often add to their policies:

Gap insurance

: This optional coverage pays for the difference between what you still owe on your car loan and your car’s actual value after a total loss.

Medical payments coverage (MedPay)

: This type of car insurance coverage takes care of medical expenses for you and your passengers after an accident.

Personal injury protection (PIP)

: Like MedPay, this coverage option can be used for medical expenses, lost wages, and more after a car accident.

Rental reimbursement:

If your vehicle is not drivable after a claimable incident, this coverage will help you pay for a rental car.

Roadside assistance

: Also referred to as towing and labor coverage, this add-on will help you out with towing, tire changes, battery assistance, and more.

Uninsured/underinsured motorist coverage

: If you are involved in an accident with an uninsured motorist, this optional coverage will help you pay for bodily injury and property damage expenses.

8. Deductibles

If your car insurance policy includes

comprehensive coverage

and

collision coverage

, you’ll also have a

deductible

—an amount of money you agree to pay out of pocket before an insurance claim kicks in to cover the rest.

A higher deductible usually means a cheaper car insurance premium while a lower deductible usually results in higher insurance costs.

Savings tip: When you’re

choosing your deductible

, go with the highest deductible you’re comfortable paying in the event of a claim.

9. Credit history

Unless you live in

California

, Hawaii,

Massachusetts

, or

Michigan

, your insurance company can use something called a

credit-based insurance score

based on your credit history to determine your auto insurance premiums.

Drivers with poor credit have a statistically higher rate of insurance claims, which drives up costs for insurance providers. A recent study by the Consumer Federation of America found that drivers with credit scores under 578 paid 115% more for insurance than drivers with credit over 823.1

Here’s what our experts found that Jerry drivers pay based on their credit range:

Credit score	Minimum liability	Full coverage
Less than 600	$70	$145
601–699	$65	$132
700+	$62	$121

While federal law permits the use of credit-based insurance scores in underwriting, it’s illegal for an insurance company to use credit as the sole reason to raise rates or deny someone car insurance coverage.

10. Eligibility for discounts

Most insurers offer a range of

car insurance discounts

that can help reduce the cost of car insurance. You could get a discount for:

Bundling

your car insurance policy with a

homeowners

renters

policy

Paying your insurance bill in full

Achieving a B average or better in school (for full-time students under 25)

Maintaining a clean driving record for a certain number of years

Owning a new car (under three years old)

Enrolling in a

usage-based insurance program

Purchasing a new policy before your current one expires

11. Annual mileage

With every mile you spend on the road, you add to the risk of being involved in an accident or being pulled over for a violation—both of which increase your car insurance costs. That’s why insurers will ask about your typical monthly or annual mileage when issuing car insurance quotes.

Here’s what you might pay for car insurance on average based on your mileage:

Annual miles	Monthly insurance cost
1,000–5,000 (low)	$132
6,000–15,000 (avg)	$144
15,000+ (high)	$153

Savings tip: Some insurers offer pay-per-mile insurance programs that can significantly lower the cost of car insurance if you drive less than 13,000 miles per year (roughly the national average).

Learn more:

The best low-mileage car insurance companies (2023)

12. Insurance company

Remember, while all insurance companies look at the same basic factors, every provider uses a different set of calculations to set your rates. That’s why insurance prices can look so different from company to company.

For example, every insurance company assigns higher rates to drivers with violations, but drivers with DUIs see a significantly lower rate increase with

Progressive

and drivers with speeding tickets will see the lowest rate increase with

Allstate

There isn’t a universal calculation for car insurance rates—that’s why all

auto insurance quotes

are estimates—and why

comparison shopping

is so important.

With the

Jerry

app, you can easily compare car insurance quotes from dozens of providers to find the cheapest car insurance. Simply download the Jerry app, enter your information, and you can review auto policies from the

best car insurance companies

The app will show you rates based on your driver profile, including your driving record and vehicle information. You can also adjust your car insurance coverage needs directly in the app.

Are you overpaying for your car insurance?

Compare quotes and find out in 45 seconds.

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FAQ

What determines the rate of your car insurance?

A wide range of factors impact car insurance rates, but some of the most important variables are your age, driving record, location, vehicle, and desired coverage.

How does insurance calculate your payout?

When you file an insurance claim, your insurance company will assign a claims adjuster to your case. They’ll review the evidence that you provided along with any information from other involved parties and law enforcement. Based on their investigation, they’ll determine the appropriate payout for your case.

Does credit score affect car insurance?

In most states, it’s legal for car insurance companies to base premiums in part on your credit-based insurance score, which is derived from your credit history. Even in states where it’s illegal to use credit scores in setting car insurance rates, drivers with poor credit typically see higher rates due to related factors, such as age, homeownership status, and driving record.

How can I lower my car insurance bill?

You can lower your insurance bill by applying for discounts, practicing safe driving, improving your credit score, and shopping around for more affordable car insurance.

Meet our experts

Hillary Kobayashi

Hillary Kobayashi is an insurance writer and editor specializing in insurance and finance topics. Hillary’s mission is to use her knowledge and love of education to help car owners better understand how they can save time and money on car ownership. The articles Hillary has published for Jerry span topics from state-specific bill of sale requirements to SR-22 insurance information.

Prior to joining Jerry, Hillary spent over ten years in education at Pacific University and the University of Oregon.

Amy Bobinger

Licensed Insurance Agent — Expert Insurance Editor

Expert insurance writer and editor Amy Bobinger specializes in car repair, car maintenance, and car insurance. Amy is passionate about creating content that helps consumers navigate challenges related to car ownership and achieve financial success in areas relating to cars.

Amy has over 10 years of writing and editing experience. After several years as a freelance writer, Amy spent four years as an editing fellow at WikiHow, where she co-authored over 600 articles on topics including car maintenance and home ownership. Since joining Jerry’s editorial team in 2022, Amy has edited over 2,500 articles on car insurance, state driving laws, and car repair and maintenance.

SOURCES

https://consumerfed.org/press_release/report-details-severe-credit-score-penalties-in-auto-insurance/