The 11 Most Important Factors That Affect Your Car Insurance Premium Rates

There are a number of factors that affect auto insurance premiums, which you may or may not be aware.

The consequences of having an auto accident can vary and haunt your for years afterward. Accidents impact not only obvious things like auto insurance rates, driving records, and property; they also affect physical and mental well-being as well as financial stability.

Age and gender can also play a role with male drivers under the age of 25 typically paying more for auto insurance premiums than their female counterparts. As people age and gain experience, their insurance rates will usually drop but other factors will come into play as well.

Some insurance companies may factor in a driver’s credit rating and will definitely check out your driving record to see if you’ve accrued any points on your license. A few insurance companies may even factor in your location though many states have passed laws prohibiting the practice.

Equally important to keeping premiums low is to maintain you current auto insurance coverage and not allow any lapses or gaps in coverage. Being caught driving without insurance can incur legal and financial penalties and if your license is suspended, it will have a negative effect on your insurance premiums.

Finally, insurance carriers will consider other factors such as whether your car is new or used as well as whether you live in an area that poses a greater theft risk, though this will only likely affect you if you have anti-theft coverage such as through a comprehensive coverage plan.

#1. Auto Accident and Insurance Increases

The consequences of having an auto accident can vary and haunt your for years afterward. Accidents impact not only obvious things like auto insurance rates, driving records, and property; they also affect physical and mental well-being as well as one’s financial status.

When it comes to auto insurance, if you’re involved in an automobile accident, premium increases are possible but not necessarily probable. How much premiums go up, if they do at all, depends on several factors:

  • Accident Factors: Factors that affect insurance premiums include the severity of the accident and whether you were at fault or not. Even though you may be found blameless or equally at fault, your insurance company may still raise your rates. Also, an accident involving property damage is less likely to raise your rates than one involving bodily injury. How much of a premium rate increase is going to depend upon whether your insurance company views you favorably.
  • Driving Record: It’s pretty simple to understand that the worse your driving record is, the more your insurance company will see you as a high risk. Insurance companies will typically keep any black marks on your record for three years from the date the premium increases.
  • Insurance Company: All auto insurance providers approach claims in their own way. Some raise rates automatically while others take a more conservative approach wherein they weigh all the accident’s factors before raising premiums. Still others may forgive an accident altogether. Again, it is largely going to depend on your history and whether you’re in good standing with your insurance company.
  • Previous Claims: Making frequent claims on your policy will likely increase your rates. The best approach is to only make a claim when absolutely necessary. Things like minor bumps and scratches may not warrant a claim if you end up paying more for insurance premiums in the long run.

#2. Age and Gender Premium Factor

Insurance companies almost always charge higher rates for drivers between the ages of 16 to 25 with 16-year-olds having the highest fatality rate of any age. 16-year-olds are also twice as likely to have fatal crashes with passengers.

Of this group, males are seen as higher risks than females because statistically they take more chances behind the wheel.

Drivers between 40 and 50 are considered the safest people on the road, which is clearly reflected in their lower premiums. It is important to understand that a driver’s auto insurance premiums will often depend largely upon their personal driving record.

At the other end of the age spectrum, drivers 75 and older follow teen drivers in close second for highest risk to insurance companies.

Typically as drivers mature, rates for men and women even out though some insurance carriers may still give women more of a discount because men still statistically drive more often and receive more tickets.

#3. Credit Rating Premium Factor

Insurers sometimes use credit scores to determine how much to charge for premiums. This can work for or against you as some insurance companies may view people with poor credit as a greater risk to ensure.

It is important to check your credit rating at least once a year to verify it has the correct information. Any inaccuracies should be corrected as soon as possible so an insurance company has the most up-to-date information.

Please note that not all insurance companies check credit scores.

#4. Driving Record and Premium Factor

Simply put the more tickets you get and accidents you’re involved in, the more of a risk insurance companies see in you.

Tickets are typically seen as a sign of poor judgment and/or unsafe driving habits. Insurers view tickets according to their severity. Non-moving violations will have little impact on premiums. So, things like parking tickets aren’t as serious as reckless driving or DUI convictions, which will most certainly raise your premiums. Similarly, speeding tickets will be scrutinized according to how fast you were going. The more you exceed the speed limit, the greater the chance your premiums will rise.

How much your rates increase will depend on a variety of factors including your insurance company, policy, age, driving history, and so on. Typically younger, male drivers are judged more strictly because they’re considered the greatest risk. Sometimes, a single speeding violation can double or even triple premiums.

The two factors that will most significantly affect insurance premiums are DUI/DWI convictions and accidents. Even a single accident, for which you are not at fault, can have a big impact on your rates and if you are convicted of drunken driving, your rates will skyrocket if your policy isn’t dropped completely.

Following most serious moving violations and accidents, insurance companies will typically raise rates for three years. It’s important to not acquire any more violations during that time so your rates can again decrease once the increase period ends.

#5. DUI and DWI Premium Factor

Over the past few decades, public awareness of the dangers of drunk driving has been raised by the media and groups such as Mothers Against Drunk Driving (MADD).

As a result DUI/DWI-related fatalities have dropped from 60% of all traffic-related fatalities in 1982 to 37% in 2008, according to the National Highway Traffic Safety Administration (NHTSA). Of the states, Texas has the highest rate of alcohol-related fatalities at 43% while Vermont and Utah recorded the lowest at 21% and 20%, respectively.

Being caught drunk driving opens up a wide range of financial and legal problems in addition to how it affects families and the social stigma that comes with such anoffense.

Also, a DUI/DWI conviction will always affect your insurance rates negatively, if your carrier doesn’t cancel your policy altogether. Often your premiums will jump anywhere from 20% to 50% but the actual amount will depend largely upon the insurance company and other factors such as your driving record prior to the conviction.

For more information on DUIs and insurance premiums, be sure to read our article here.

#6. Location of Vehicle Premium Factor

Insurance rates are determined based upon your likelihood that you’ll file a claim.

Typically states with higher population densities will pay more for insurance than states that are more sparsely populated. The reason for this is that the more people that live in a given area, the more cars and congestion and the greater chance of having an accident. It also matters whether you live in the city or a suburb.

Some states have passed legislation wherein insurance companies cannot charge more because you live in one area or another.

#7. Current Auto Insurance Premium Factor

It is important to maintain constant coverage and not allow your coverage to lapse. As simple as that sounds, thousands of drivers are caught each year driving without proper insurance coverage. The consequences of doing so are fairly clear.

First and foremost, driving without insurance puts you at great financial and legal risk. If you get into an accident and you don’t have insurance, and you are found at-fault, you are liable for all the victim’s expenses as a result of the accident as well as your own. If you think about all the associated expenses including doctor visits, physical therapy, car repair, and so on, they add up very quickly.

This should be labeled under Common Sense but if you drive a vehicle, you should never go without coverage. If you allow your insurance to lapse or simply choose not to carry a policy, you’re taking an enormous risk with your financial future and safety.

#8. Points on License Premium Factor

Points on licenses are a common and easy way to gauge the risk a driver poses to an insurance company. Most states utilize one of two systems and if a driver is not careful, they can quickly accumulate too manypoints in a very short period of time.

There are several important things to keep in mind when or if you are ever assessed points on your driver’s license.

  • Each state has their own statute of limitations regarding when points are removed from your record. For example, if you live in Maine, points only take one year to disappear whereas In Massachusetts, they will remain for six years. You should check with your state’s DMV to see exactly how long points remain on your record.
  • If you are ticketed a number of times in a certain period of time, you can easily check with your DMV to obtain your driving record and see how many points you have accumulated. This is good to know so you can take appropriate action such as enrolling in traffic school or taking other points-reducing actions.
  • More and more states are now allowing drivers to obtain their driving records online. You should check your DMV’s website to see how or if you can do this. Very often there is a nominal fee attached.
  • It’s important to also remember that many times your driving record will follow you from state to state. If you move, remember that many things you’d rather forget such as convictions, accidents, moving violations, and other items will be detailed on your driving record.

#9. Auto Insurance Premium Factor for New and Used Car

New and expensive cars cost more to insure than older or previously owned/used ones.

The greater a car’s value, the more expensive it is to insure because of the car’s higher repair/replacement value makes it a greater risk to the insurer.

Conversely, used cars typically cost far less to insure and might not even require collision coverage. As time goes on, it will make less sense to have too much coverage simply because the car’s value is less than what it costs to insure.

The only exception to this is if the car you are purchasing is a classic or antique vehicle.

#10. Theft Risk Insurance Premium Factor

If you live in a high-theft area and you have comprehensive coverage, you’re likely to have a higher rate on your policy.

If you are concerned about theft, you should remember a couple of things. First of all, your insurance company will calculate your theft coverage premium based on where you live and your risk of theft. They will also factor in where and how you park your car. If you park your car in a garage, instead of in a driveway or on the street, it will be harder for thieves to get to your car so your rates will likely be lower.

Also, many insurance companies will only pay for the actual cash value (ACV) of your vehicle. If you own an older car, the cost of theft coverage may not outweigh the value of replacing it.

Also, many insurance companies will only pay for the actual cash value (ACV) of your vehicle. If you own an older car, the cost of theft coverage may not outweigh the value of replacing it.

#11. High-Risk Auto Insurance

Insurance companies consider many factors when placing customers in the high risk auto insurance category. Drivers who have been convicted of one or more DUI/DWIs, have reckless driving citations and/or numerous vehicle violation tickets, or have been involved in two or more accidents within a one year period are considered the greatest risk. For obvious reasons, these individuals will have a difficult time obtaining auto insurance coverage.

Traditionally, middle-aged, non-smoking women represent the least risk to auto insurance companies. Males under the age of 25 carry the highest risk when formulating insurance coverage costs. Insurance companies also take into account where the car is located (state, city, even specific neighborhood) and the type of car that is being insured- red convertible sports car (risky) versus modest family sedan (less risky). In the world of high risk auto insurance premiums, risky almost always equals expensive.

The most common factors which can cause an individual to be considered a high risk driver are as follows:

  1. New, inexperienced drivers (adult or teenage)
  2. Drivers with numerous and frequent moving violations, such as speeding tickets
  3. Drivers with one or more DUI/DWI citations/convictions
  4. Anyone convicted of reckless driving
  5. Anyone involved in two or more accidents within a one-year period
  6. Individuals with a poor credit score/history
  7. Persons with medical conditions which could possibly impair their driving ability
  8. Males under the age of 25 and individuals over the age of 70

Many times when insurance companies place an existing policyholder in the high risk auto insurance category they also drop their coverage and refuse them an alternative policy. When this happens, consumers can consider using a state’s Automobile Insurance Assigned Risk Plan (AIARP). Each individual state has an AIARP which allows certain drivers who have DUIs, reckless driving convictions, and/or repeated traffic violations to obtain that state’s minimum liability requirements. While this does guarantee coverage, it also comes with a big price. High risk drivers normally will pay 2-3 times the national average for this type of policy.

If a driver is denied coverage from the AIARP, it is still possible to find auto insurance coverage. Hundreds of companies do offer non-standard car insurance policies, but as expected, at a much higher cost to the consumer. Insurance companies make their own evaluations regarding a high risk driver and whether to offer that person insurance coverage.

Drivers who think they might fall into the high risk category may want to consider contacting their local Department of Motor Vehicles for more specific information on non-standard auto insurance providers and the state’s AIARP. Also, the National Association of Insurance Commissioners offers a complete listing of state insurance department websites.

Frequently Asked Questions

How are my auto insurance rates determined?
Your particular auto insurance premiums are based upon a number of factors including any accidents you’ve been involved in, age, gender, credit rating, location, whether your car is new or used, and most importantly your driving record. If you have a comprehensive policy other factors will come into play including how much of a risk to theft your vehicle is.

How can my credit rating affect my auto insurance?
Credit rating can play a role in determining your auto insurance premiums. Many companies look at how you handle your finances as a sign of how responsible you are. If you have a solid credit history and low debt-to-income, you will likely be viewed more favorably than someone who spends freely and racks up lots of debt.

What personal information do I need to give to my agent or insurance company?
You will need to provide things such as address, vehicle specifics (year, make, and model), Social Security number, and other very basic information. You should also be able relate your insurance history and any information about other drivers on the policy. Be prepared to possibly give them permission to review your driving record and credit history.