Factors That Affect Car Insurance Rates

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What Factors Determine Your Insurance Premium? 

Whether you’re looking to compare car insurance quotes for your new vehicle or you’re looking into switching to another insurance provider, you’ve come to the right place! Perhaps you just purchased a brand-new (or used) vehicle, or maybe you’re just tired of overpaying for your current auto insurance premiums.

We’ll be the first to admit that car insurance (and most insurance, for that matter) can be incredibly confusing. To the average consumer, it can often seem like the insurance industry is rigged against them. It seems like insurance agents have access to all of the knowledge and information and that most policyholders and shoppers have almost no idea of what’s going on. 

In fact, if you were to survey most people who have car insurance and ask them what exactly they were paying for, we’d be willing to bet that at least 50% of people would have no idea. That’s because the public school system (and even colleges) don’t bother to teach students about insurance. Even though insurance is something that almost every American is required to purchase at some point in their life, there are very few resources to learn about how it all works. 

One of the reasons we started Insuranks is to “declassify” insurance for our readers. In this article, we’re going to discuss some of the top factors that determine your car insurance costs. The next time you’re out shopping for a new policy, you’ll be armed with all of the information that you need to know in order to negotiate a fair price on your monthly premiums and ensure that your agent isn’t ripping you off for their own profit. 

Let’s have a look! 

What Affects Car Insurance Rates?

Although auto insurance and all of its associate terms may be a bit complicated to understand at first, the general concept is fairly simple and straightforward:

The price you pay for your insurance policy is directly related to the value of the vehicle you’re driving and the risk that you represent to the insurance company. 

In quick terms, the more likely you are to wreck your vehicle or be involved in an insurance claim, the higher you’ll pay for your insurance policy. The less likely you are to be involved in an automobile accident, the lower you’ll pay for your insurance policy. Remember, insurance companies are businesses too. 

Ultimately, they have to make money to stay in business, which means that they have to keep a close eye on their bottom line and ensure that there’s always more money coming in than they’re paying out in claims. Just like in a casino- the house always wins. 

Your car insurance quotes are given by the insurers based on the information you provided to them, and through that they determine your risk profile. Your risk profile and car insurance rates are based on these following factors: 

• Driving history
• Background
• Credit score
• Age
• Gender
• Location
• The vehicle you drive 
• Vehicle usage
• Coverage type and amount
• Marital status: Married people are statistically involved in less auto accidents than singles, divorced and widows
• Homeownership: homeowners pay dramatically less for their car insurance than renters for a similar coverage, thanks to auto and home insurance bundle discounts
• Any other relevant information for the insurer to assess their carried risk of insuring you!

That being said, here are the top factors to consider if you’re wondering how to estimate car insurance costs! 

Your Age

The age of the driver is one of the most important factors when determining your car insurance premiums. Statistically speaking, younger individuals are far more likely to be involved in an automotive accident, and middle-aged and older individuals are less likely to be involved in an accident. 

For example, the most dangerous group of drivers in the United States is drivers between 20 and 24. This age range makes up almost 8% of all drivers, contributing to over 36% of deadly accidents. These drivers are often young, inexperienced, and their brain’s prefrontal cortex has yet to fully develop. This means that they’re a lot more likely to take risks, speed, drive recklessly, or not be fully attentive while driving. By default, teenage drivers are often lumped into the same category. 

In contrast, drivers between the ages of 50 and 54 are the least likely to be involved in a car accident. This age range represents just over 9% of the total driving population, and 21% of accidents end up being fatal. 

Your Personal Driving Record

Apart from your age, your personal driving record is another important factor that all insurers take into account. Your driving record says a lot about how likely you are to be involved in an accident in the near future. For instance, if you’ve gone five years without being involved in a single accident or without receiving a reckless driving traffic ticket, then you look very favorable in the insurer’s eyes. 

However, suppose you’ve been involved in two or three accidents over the past five years and/or received numerous traffic violations. In that case, you represent a high-risk customer to the insurer. Statistically speaking, you’re far more likely to be involved in another accident that will cost the insurer more money in claims payouts. 

Your Credit Score

Although it’s not the most important factor, your credit score does play a role in the average car insurance cost. If you have a higher credit score, you’re more likely to be a financially responsible individual who drives with care and always makes their monthly payments on time. Conversely, if your credit score is less than average, then you represent a risk that you may not make your payments on time or might be more of a risk-taker.

The Year, Make, and Model of Your Car

The type of car you drive plays a huge role when insurers are determining your car insurance costs. Simply put, the more expensive your vehicle is, the higher your insurance policy will be. The monetary value of your vehicle isn’t the only thing that’s taken into consideration either. Insurers also take other factors into account such as:

• The statistical likelihood of your vehicle being involved in a crash. 

• The color of your vehicle (bright-colored cars tend to be involved in more accidents).

• The size of your engine (bigger engines mean faster driving and higher risk).

• How many doors your car has (two-door coupes are involved in more accidents).

• Safety features in your car (the more safety features, the less likely you are to be involved in an accident). 

The Insurance Company you go With

Apart from your personal information and the car you drive, insurance rates may vary significantly from one auto insurance company to the next. One of the best ways to ensure that you’re getting a good deal is to compare and contrast insurance quotes from one insurer to another. 

In the old days, you would have to call each insurer individually and request a personal quote. Today, however, you can use insurance searching platforms such as Young Alfred or Gabi to compare quotes from the top insurers on the market automatically.