To determine your car insurance rate, insurers weigh a number of risk factors about you, your vehicle and your driving history. When they do this, the insurer is trying to predict how likely you are to file a claim or miss a premium payment, and they increase prices accordingly.
The method for calculating premiums can vary across companies, meaning your rate can vary between insurers, but some variables are considered by the majority of companies.
Here are 11 factors that most insurers use to calculate your auto insurance premium.
1. Driving record
Your driving record is an important piece of information for car insurance companies. When you request a quote or renew your policy, the insurer reviews your motor vehicle report (MVR), which is a comprehensive record of your recent or complete driving history.
Providers add surcharges to your policy if they find car accidents or traffic violations in the last three years, though they may look even further back, resulting in a higher rate.
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Car insurance costs by violation type
2. Past coverage and claims
Insurance companies prefer drivers who have had a policy for a long time with few claims and no lapses in coverage.
Prospective insurers are able to see your claims history via your CLUE report, which you are also able to request. If the report shows claims in the last few years — especially at-fault claims — or if you’ve let your coverage lapse, expect a higher premium.
3. Age and driving experience
Insurance companies trust experienced drivers with proven records of safe driving, and they reward that trust with lower premiums.
Young drivers with limited experience can expect to pay higher rates than those with more driving experience.
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Full coverage car insurance costs by age
4. Location
Providers review risk factors in your ZIP code to help determine your rate. This tells them how much crime occurs in your area and how likely you are to be caught in a weather hazard or natural disaster.
Living in an area with high rates of auto theft, vandalism, and traffic incidents can raise your insurance costs, which is why drivers in urban areas tend to pay more than those in rural areas.
Frequent natural disasters, such as wildfires and hurricanes, can also raise your rate.
5. Car make, model, and age
Your auto insurance rates depend heavily on your vehicle. In general, drivers with newer vehicles that have high safety ratings pay lower rates, while luxury cars, sports cars and older vehicles without standard safety features can cost more to insure.
If you’re car shopping, check NHTSA safety ratings for recall information and review insurance losses by make and model on the Insurance Institute for Highway Safety’s website. These reports can help you determine how high your insurance costs may be.
Compact crossover SUVs tend to be the cheapest cars to insure. They typically have the lowest rates thanks to their sturdy build, excellent safety record and affordable repair parts.
6. Types of coverage and coverage limits
Many drivers opt for full coverage car insurance, which includes your state-mandated liability insurance along with collision and comprehensive coverages.
Full coverage is more expensive than a state minimum policy, but it also provides more holistic protection. Full coverage is usually required by lenders for financed and leased vehicles.
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Minimum vs full coverage costs
Your liability limits also factor into car insurance pricing. Many states require drivers to purchase liability coverage limits of 25/50/25 — meaning the insurer will pay 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 such as 50/100/50 or 100/300/100 increase your protection, but they also add to your monthly premium.
7. Optional coverage
Adding optional coverages to your auto insurance policy raises your premium. Here are some popular add-on coverages:
- Gap insurance: This optional coverage pays the difference between what you owe on your car loan and your car’s actual value after a total loss.
- Medical payments coverage (MedPay): This coverage pays 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 and lost wages after a car accident.
- Rental reimbursement: If your vehicle is not drivable after a covered incident, this coverage will help you pay for a rental car.
- Roadside assistance: Also referred to as towing and labor coverage, this add-on pays for things like towing, tire changes and battery assistance.
- Uninsured/underinsured motorist coverage (UM/UIM): If you are involved in an accident with an uninsured motorist, this optional coverage helps you pay bodily injury and property damage expenses.
8. Deductible
If your car insurance policy includes comprehensive and collision coverages, you’ll also have a deductible, which is an amount 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.
Jerry insight:A higher deductible often helps to lower your premium, however, you may have to come up with the cash quickly if you’re in an accident. Though a low premium is appealing, aim for a deductible you could afford to pay with little notice.
9. Credit history
Unless you live in California, Hawaii or Massachusetts, your insurance company can use a credit-based insurance score, which includes your credit history, to help set your premium.
Insurers can associate a low credit score with a higher chance of an insurance claim, which drives up costs for providers. This means having a higher credit score may help you get a lower rate.
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Car insurance costs by credit score range
10. Eligibility for discounts
Most insurers offer discounts to help reduce premium costs. Drivers can often get discounts for:
- Bundling your car insurance policy with a homeowner or renter policy.
- Paying your insurance bill in full.
- Insuring a student with a B average or better.
- Maintaining a clean driving record for a certain number of years.
- Owning a new car.
- Enrolling in a usage-based insurance program, often referred to as telematics.
- Purchasing a new policy before your current one expires.
11. Annual mileage
With every mile you spend on the road, you increase your risk of being involved in an accident or receiving a violation — both of which raise your car insurance costs. That’s why insurers ask about your typical monthly or annual mileage when issuing car insurance quotes.
FAQ
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Does credit score affect car insurance?
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How can I lower my car insurance bill?
Methodology
Data included in this analysis comes from policies that Jerry has quoted on or after Jan. 1, 2024. Jerry services 48 states and offers a range of insurance companies to choose from.
Megan Lee is an editor, writer, and SEO expert who specializes in insurance, personal finance, travel, and healthcare. She has been published in U.S. News & World Report, USA Today and elsewhere, and has spoken at conferences like that of NAFSA: Association of International Educators. Megan has built and directed remote content teams and editorial strategies for several websites, including NerdWallet. When she`s not crafting her next piece of content, Megan adventures around her Midwest home base where she likes to drink cortados, attend theme parties, ride her bike and cook Asian food.
Annie is a content strategist at Jerry and has more than a decade of experience writing and editing digital content. Before joining Jerry, she was an assistant assigning editor at NerdWallet, where she covered loans. Previously, she worked at USAA and newspapers in Minnesota, North Dakota, California, and Texas. She holds a bachelor’s degree in journalism from the University of Minnesota.
