The Factors that Determine Car Insurance Rates

Car insurance rates

Have you ever wondered how insurance companies determine car insurance rates? Would you be interested in finding out how you can get low rates on your next auto insurance policy?

Well, you have come to the right place.

We’ll give you the lowdown on the many crucial factors that determine your car insurance rates, along with what you can do in order to get the best insurance deals without breaking a sweat.

Want Low Insurance Rates? These are the 3 Main Factors

The easiest way to get cheap auto insurance is to choose a policy with limited coverage (which is risky) and to raise your deductible (which is good practice). That we know too well.

But it actually goes way deeper than that.

There are 3 main factors that you need to consider. Believe us when we say that your insurance company will scrutinize each and every aspect of these 3 main factors the very minute that you walk into their office or when you ask for an online quote, and these are:

  1. Driving habits and driving activities
  2. Car-related factors; and
  3. Demographics

The main thing to consider here is risk assessment. Insurance providers will evaluate the potential risks in determining your insurance rates, and they will look into these 3 main factors to arrive at a conclusion.

Let’s take an in-depth and comprehensive look at these aforementioned factors.

1. Driving Habits

Nissan 240SX Drifting

If you have a bad driving record, get driving tickets, or if you filed multiple insurance claims in the past, then you will get higher rates compared to a driver with a squeaky-clean driving record.

Most of the time, people with really bad driving records (involved in multiple accidents or wrecks, habitual speeding, or if you get charged with a DUI) will find it difficult to get any sort of auto insurance.

There’s more: your driving record is the most crucial factor that will affect your insurance premiums.

Did you know that a bad driving record will easily double or triple your insurance premiums?

But there’s a silver lining beneath these clouds. Driving tickets and other non-injury accidents will not affect your insurance rates after a period of there (3) years, and injury-related accidents will stop hindering your chances of getting cheap car insurance after five (5) years.

In order to get low premiums on your auto insurance policy, it would be a good idea to clean up your act and be a safer driver. It’s as easy as that.

If you were charged with DUI, however, then you can expect your insurance premiums to skyrocket in the coming years. How long? Drivers charged with DUI will probably have to wait ten (10) years before they can expect lower insurance premiums.

The lesson here is don’t drink and drive, plain and simple.

Driving Activity

Insurance companies will also consider how you use your car, your average yearly mileage, and where you drive your vehicle.

It’s really not that hard to understand. If you’re a salesman, and your daily routine is driving hundreds of miles across many states, then insurance providers will assume that you are most likely to get involved in an accident, because you are constantly on the road.

On the other hand, if you’re a writer and you do most of your work at home, or if you don’t use your car to commute to the office, then you can get a discount on your auto insurance policy.

But that’s not all. If you keep or park your car in a shaded and secluded garage (instead of parking it on the street or on the sidewalk) then this can also reduce your insurance premiums because your car is less at risk of incurring damages due to vandalism and other unexpected yet costly events (like a coconut falling on your roof).

2. Car Related Factors

1991 Acura NSX cutaway

The type of car you drive will also influence your insurance premiums. Things such as the safety rating of the vehicle, the size of your car, and the age of your trusted steed will play a major part in determining your car insurance rates.

  • Vehicles with 5-star safety ratings are generally considered less risky than those with average or below-average safety ratings.
  • Sports cars, supercars, and high-performance vehicles will be more expensive to insure.
  • Larger vehicles such as pick-up trucks and SUVs are generally considered safer in an accident than sports coupes and compacts, and hence cheaper to insure.
  • Cheap cars or family econoboxes with small engines are cheaper to insure. But if you drive a Mitsubishi Lancer Evolution or Subaru WRX STi, then you will pay a higher insurance premium. Even though these cars are based on econoboxes, they are generally considered high-performance vehicles with turbocharged engines.
  • Even though 90% of off-road vehicles will never be driven off-road, 4×4 vehicles are more expensive to insure, since insurance providers will assume that you’ll go climbing a mountain or forge a rocky trail, which is riskier than driving on flat tarmac roads.
  • Older cars tend to have less safety equipment and features than newer cars, so older vehicles are typically more costly to insure. If you drive an older car, it would probably be best to forego collision coverage since the cost to repair an older car tend to be a bit higher than the total FMV of the vehicle.

Here’s another thing to consider: if your car belongs on the list of the top 10 most stolen vehicles, then you can expect to pay a higher premium on auto insurance. Do you have a Honda Accord, Toyota Camry, or Ford pickup? You should seriously consider installing a CCTV system outside your house.

3. Demographics

Uber Driver & Passenger Los Angeles

Your age, gender, marital status, where you live, and your credit score will be closely examined by insurance providers to determine your car insurance rates.

Age, Gender & Marital Status

Did you know that male teens pay the highest premiums even without the presence of driving tickets or recorded crashes? The average premium paid by male teen drivers is around $2,500 per year.

In the unlikely event of a driving ticket or non-injury accident, the premium can easily double to around $5,000 per year. If you think that having copious amounts of testosterone is cool, then you better think again.

  • Male teenagers are involved in more accidents than female teens.
  • Both male and female drivers aged 25 or older will pay less money on auto insurance, which is around 20% less for males and 15% less for female drivers.
  • Women will typically pay 105 less on car insurance than men.
  • Young parents between 30 to 39 years old will usually enjoy lower insurance rates.
  • Getting married or married men will enjoy significantly low rates.
  • Older men will generally enjoy lower rates than older women.
  • Senior citizens between 50 to 65 years old pay the least money on auto insurance.

Where You Live

If you live in a densely populated neighborhood, your car is at a higher risk of theft, collisions, injuries, and accidents, hence you get higher premiums.

The same goes for urban areas with a high incidence of theft, high rates of unemployment, and uninsured drivers. Did you know that Texas and California account for around 1/3 of all auto thefts in the US?

Credit Score

It’s a known fact that insurance providers will examine your credit score to determine your car insurance premiums. If your FICO score is 689 to 719, then you’ll enjoy lower insurance premiums. The same can’t be said for those with bad credit, or for those who have a credit score below 630.

If you happen to be one of those people with bad credit, or if you are recovering from bankruptcy, it would be best to clean up your credit score by restructuring debt and paying all your bills on time in order to get favorable rates on your auto insurance.

Your Credit Score Matters. Do you know yours? Get Your Free Score Now at Credit Karma.


Now that you know the factors that determine car insurance rates, your main job as a consumer is to ask for multiple online quotes in order to get the best deals on auto insurance. Of course, it helps to have a high credit score, or if you live in a rural area with a low incidence of theft and crime.

But for those who happen to be unmarried male with traffic tickets and live in an urban area with no garage, simply asking for an online car insurance quote is the easiest way to shop around for affordable insurance premiums.