Auto Insurance

Why Your Auto Insurance Premium Is the Number It Is

8 min read · Aug 5, 2023

In This Article

Age, location, driving record, and more all shape what you pay. Learn the key factors insurers use to calculate your rate.

Key Takeaways

Your driving history is one of the strongest signals insurers use to set your rate.
Where you garage your vehicle affects your premium as much as how you drive.
The coverage types and deductible amounts you choose directly change what you pay.
In most states, insurers can use a credit-based insurance score as a rating factor.
Vehicle make, model, and age all influence the collision and comprehensive portions of your rate.
Shopping with the same coverage limits lets you compare quotes on equal terms.

How insurers arrive at a number

An auto insurance premium is not arbitrary. Insurers apply actuarial models that translate measurable characteristics into a probability of loss. Each factor gets a weight, and those weights multiply together to produce the rate you see. Understanding the inputs helps you see why two neighbors driving similar cars can pay noticeably different amounts.

For a broader grounding in how policies work before diving into pricing, Auto Insurance 101 covers the fundamentals of coverage types and policy structure.

A printed auto insurance declarations page showing coverage types and premium amounts — Your declarations page lists each coverage and its cost, letting you see exactly where your premium comes from.

The factors that carry the most weight

Driving record and claims history

At-fault accidents and moving violations (speeding tickets, reckless driving citations) tell an insurer that you have made costly decisions in the past. A single at-fault accident can raise a premium for three to five years, depending on the insurer and state rules. A clean multi-year record, on the other hand, often qualifies a driver for accident-free credits.

Where you live and garage the vehicle

Insurers rate by ZIP code because the local environment shapes risk. Urban areas tend to have higher rates of theft, vandalism, and collision frequency. A rural ZIP code generally sees lower claim frequency, which pushes the location component of a premium down. Moving even a few miles can change your rate.

Annual mileage

More miles driven means more time exposed to potential accidents. Drivers who commute long distances or use their vehicle for rideshare work typically pay more than drivers who use their car mainly on weekends. Some insurers now offer usage-based programs that measure mileage directly through a telematics device or app.

Vehicle characteristics

Insurers look at repair costs, parts availability, theft frequency, and crash-test safety ratings for your specific make and model. A vehicle with expensive replacement parts or a high theft rate will carry a higher comprehensive and collision premium. Safety features like automatic emergency braking can reduce the injury-related portions of a rate.

Coverage selections and deductibles

The coverage types you choose and the limits you set directly determine a portion of your premium. Carrying only state-minimum liability coverage costs less than adding comprehensive and collision. Within those coverages, a higher deductible (the amount you pay before insurance pays the rest of a claim) reduces the premium because you absorb more of the small-claim risk yourself.

~30%

Average premium increase after one at-fault accident

Estimates from insurance industry actuarial data suggest a single at-fault accident raises the average premium by roughly 30%, though the figure varies by insurer and state.

3-5 years

Typical period an at-fault accident affects your rate

Most insurers look back three to five years when rating a policy, meaning an at-fault incident can influence your premium through several renewal cycles.

44 states

States permitting credit-based insurance scoring

As of recent state regulatory reviews, the majority of U.S. states allow insurers to use credit-based insurance scores as a pricing factor, with a small number restricting or banning the practice.

Factors that vary by state

Credit-based insurance scores

Most states allow insurers to use a credit-based insurance score, a metric derived from credit data but distinct from a standard FICO score, as a pricing factor. Insurers argue the score correlates with claim likelihood. California, Hawaii, Massachusetts, and Michigan restrict or prohibit the practice. How credit factors into auto insurance pricing explains the mechanics in plain terms.

Age, gender, and marital status

Young drivers, particularly those under 25, pay substantially more on average because statistical claim rates for that group are higher. Some states restrict the use of gender as a rating factor. Married drivers often receive a modest rate reduction in states where marital status is a permitted variable.

These factors can shift without any action on your part. A lapse in coverage, a new address, or a credit change can all move your premium higher without an accident ever occurring.

Using this knowledge when you compare plans

Knowing the factors that shape your rate lets you compare quotes more precisely. When you request quotes from multiple insurers, use identical coverage limits and deductible amounts so the comparison reflects only pricing differences, not coverage differences. If one quote is significantly lower, check whether the coverage limits match before assuming it is a better deal.

If you financed your vehicle, your lender likely requires comprehensive and collision coverage, which adds to the premium. What happens after an at-fault accident is also worth reading before you decide how much coverage to carry, since claim history affects future rates.

This article is for general informational purposes only and does not constitute personalized insurance, financial, or legal advice. Coverage terms, exclusions, and pricing vary by provider and state. Read your policy documents carefully and consult a licensed insurance agent for guidance specific to your situation.

Why did my premium go up if I had no accidents?

Several factors outside your driving record can raise your rate. A change in your credit-based insurance score, moving to a new ZIP code, adding mileage, or broad rate increases filed by the insurer with state regulators can all push premiums higher. See what silently raises your rate for a fuller list.

Does my car's age lower my insurance cost?

An older vehicle typically has a lower market value, which reduces what the insurer would pay on a comprehensive or collision claim. That can make those coverages cost less, or make dropping them financially reasonable. However, an older car with a poor safety record may still carry relatively high liability exposure.

How does a higher deductible affect my premium?

A deductible is the amount you pay out of pocket before your insurer covers the rest of a claim. Choosing a higher deductible shifts more risk to you, so the insurer charges a lower premium. The trade-off is that you need enough savings on hand to cover that amount if a claim occurs.

Can I be charged a higher rate because of my credit score?

In most U.S. states, yes. Insurers use a credit-based insurance score, which differs from a standard credit score, as one factor in pricing. A handful of states restrict or prohibit the practice. How credit factors into auto insurance pricing explains how this works in detail.

Does the type of car I drive change my premium?

Yes. Insurers look at repair costs, theft frequency, safety ratings, and the likelihood of total loss for your specific vehicle. A car with expensive parts or a high theft rate generally costs more to insure for comprehensive and collision coverage.

Is this article personalized insurance advice?

No. This content is general educational information only, not personalized insurance or financial advice. Coverage terms, exclusions, and pricing vary by insurer and state. Consult a licensed insurance agent for guidance tailored to your situation.

Auto Insurance Editorial Team

Auto Insurance Editorial Team is the collective byline for our editorial team and contributor network. Articles published under this byline or an editorial pen name are researched, written, and reviewed according to our editorial standards for clarity, consistency, and independence before publication.