What Factors Are Impacting Your Auto Insurance Rates?

Michael Collins
Dec 27, 2020

Your car is arguably one of your most important possessions. As such, having car insurance is the best way to protect your car as well as its passengers should you ever get in an accident. However, certain factors can affect how much you are paying for car insurance. Factors like your age, gender, driving experience, credit score, and many others affect your car insurance rate.

Car Insurance 

Cars are arguably the single most insured thing there is. If you are a newer driver, it is important to be as informed about auto insurance as possible. Car insurance is very important for all drivers to have, as it can protect your car as well as yourself and other people in the vehicle. Car insurance is so important that unlike other types of insurance, it is mandated to have across many states. Actually, 48 states require you to have enough car insurance to be able to pay for the damage you caused in the case of an accident!

Accidents happen. At some point in your driving career, you may be involved in an accident, whether it is your fault or somebody else's. If you get in an accident and do not have car insurance, you could be paying out of pocket for the damages! If you have a car, you know how expensive it can be to maintain and repair your car. Depending on the severity of the damage, you could be forced to pay thousands of dollars in damages from your own bank account if you have no insurance. Insurance can even protect you from damage not caused by a collision, like vandalism, weather damage, or animal damage.

Likewise, damages apart from your car can occur as well. If you are injured in a car accident as a driver, insurance can help cover a big portion of your medical bills. Just like car repairs, medical expenses can be very expensive and you also do not want to be paying out of pocket for them if you don't have insurance. Having car insurance is not only a safe thing to do but is also a financially smart decision as well. 

The point is, you are most likely going to need car insurance at some point in your life. As such, you should be aware of how much it might cost and what factors will affect that cost. The average car insurance can range anywhere from about $1,500 to $7,000 a year! The causes of this huge cost range can be attributed to many factors, some of which make sense and others that seem slightly strange. Let's take a look at the factors that affect your car insurance rate so you can know how much you can expect to pay.

Age

The age of the driver of the insured car is quite possibly the factor with the biggest impact on your car insurance rate. Every time an accident occurs with an insured car, the auto insurance company loses money. Because of this, the auto insurance companies charge people that are more likely to damage their car more to be covered by their insurance. Depending on your age, you could see your car insurance rates decrease or increase because of this. Seem confusing? Let's clear some of the air.

It goes without saying, but inexperienced drivers, especially a teenage driver between 16 and 17 year old who is just beginning to drive, get into more accidents. They simply do not have the experience and know-how that older drivers do. Plenty of data shows drivers are more likely to get into accidents the younger they are. Insurance companies know this and charge drivers around this age more accordingly. As a young driver, your insurance rate will remain high and only begin to decrease after you reach about 25 years of age. As you continue to get older, your insurance rate will likely continue to decrease.

On the other hand, your car insurance rate can actually increase as you age above 65! Data shows an older driver aged 65 and older gets into more car accidents than the typical adult. Similarly, drivers of this age get injured more frequently and more severely when they get into accidents. Both of these factors result in higher car insurance rates.

Driving Record

This one does not need too much explanation. Just like the Progressive commercials always tell us, safe driving can save you some money on your car insurance. A clean driving record means fewer  accidents!

It makes sense; the cleaner your driving history is, the less money your insurance company will need to cough up to pay for your damages or injuries. A customer who does not get into accidents is the best customer an insurance company could ask for! To reward those with a safe driving history and to incentivize more safe driving down the road, car insurance companies will lower your rate if you don't get into accidents.

On the other hand, if you frequently get into accidents your insurance rate will surely go up. Each accident costs the insurance agency and they will charge you a higher rate to recoup some of these losses. Driving safe is a good move financially!

Driving Violations 

Some car insurance policies may pay some of the cost of your tickets and fines from your driving violations. Similar to your driving record, the number of driving violations and severity of these violations will impact your car insurance rates. Notably, violations that are considered "high risk" will really make your car insurance policy jump. For example, a DUI / DWI, criminal / excessive speeding, reckless driving, and driving without a valid driver's license are considered "high risk" violations and will cause your rate to increase. 

Car insurance agencies A) don't want to pay your fines and tickets and B) do not want to see you being risky and unsafe with your driving. Just like with accidents, the less violations you have and the more infrequent they are, the more you will be rewarded. Again, smart and safe driving is not only good for your safety but is good for your wallet too. 

If you have racked up some violations, they will not stay on your record with your insurance company forever. In general, your insurance carrier will price these violations into your car insurance rate for about 3 or more years. In other words, for 3 years or so, your rate will be more expensive because of your violations but will decrease once it has been about 3 years.

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Vehicle Make / Model

Not all cars are created equal. Depending on the car that you have, you could be paying a different car insurance rate than your neighbor. Car insurance companies want their clients to drive cars that are both safer and are less likely to be stolen. A safer car means less damage and injuries sustained to the driver. Cars with little risk of theft means the insurance company is unlikely to need to pay to insure the client.

Safe cars that are not very flashy, like the Nissan Altima or Honda Civic, may have lower insurance rates than a Ferrari or a Porsche. Odd enough, cars like Ford pickups are statistically stolen more than other cars and might actually make your insurance more expensive. 

P.S. Despite popular belief, the color of your car does not affect your car insurance price. Red cars cost the same as the other colors!

Gender

As surprising as it might sound, car insurance companies are legally allowed to discriminate based on gender in most states. Sorry gentlemen, this discrimination really only applies to younger drivers that are men aged 25 and younger. Like we mentioned earlier, the younger you are the more you pay for car insurance. Insurers around the country have deemed young men to be more reckless and more likely to get into accidents than females of the same age. Because of this, men under 25 will pay roughly 15% more for car insurance than women. After 25, the gap begins to close and then evens out at around age 30.

Yearly Miles  

No matter how safe you are, the more miles you drive the more likely you are to get into an accident. Car insurance agencies take this into account and charge higher insurance rates to drivers who drive more miles per year. According to The Zebra, the average additional cost of a driver who drives 15,000+ miles compared to one who drives 7.500 miles is about $100. However, this gap is far greater in California. Whether it's due to more traffic or a higher accident rate per mile, the difference is nearly $560 between these two mileages.

While yearly mileage can affect how much you pay, this is not the case with every insurer. Depending on your insurer, your mileage may not matter. Driving 15,000 a year with these companies will cost you the same as driving 1,000 miles a year. If you are constantly driving, companies like there could make your car insurance rate cheaper than others.

Marital Status

Your relationship status, whether it be single or married, has a small effect on your car insurance rate. Individuals that are married drivers get into accidents less frequently and thus do not need insurance to pay for their damages as much. Whether it be because married drivers tend to have more kids and drive safer or for a different reason, your car insurance will be slightly cheaper if you are married. However, don't go getting married just because Michael from Possible told you it could make your car insurance price cheaper. The difference between a married, divorced, and single drivers is quite minimal.

Location

For a plethora of reasons, your car insurance rate can vary based on the city or town you live in, even down to your specific zip code. Why is it so specific? Well, every town and city is different from the next and within them, zip codes can vary from each other as well. 

For example, each city can vary greatly from the next. A huge city like Los Angeles with a gigantic amount of drivers and mind boggling amount of traffic causes much more accidents than a city like Toledo, Ohio. Because of this, drivers in Los Angeles will tend to pay higher costs for their car insurance than most other cities. If you live in a rural city, the chances of you getting into a car accident are much smaller than if you were in a city. Obviously, rural roads have less drivers and less traffic, so your auto insurance rate will be cheaper here. 

Similarly, cities with higher crime rates will tend to be charged more by their insurer for their car insurance. the higher the crime rate, the more likely your car will be broken into or vandalized and will need to be repaired. Within cities, zip codes may vary in crime rate from each other. Your friend could be living across town and be paying more for their car insurance because of the crime rate in their area. Again, rural areas will tend to get cheaper car insurance costs in terms of crime rate as rural areas have less people and tend to have less crime than big cities.

Credit History

As we talk about in many of our other blogs, your credit score is extremely important and isn't just important for getting loans and credit cards. Among many other things, your credit score and credit history can determine how much you will be paying for car insurance. While not every single state allows this, the majority of states allow their insurance provider to charge you more for their car insurance if you have a poor credit score or credit history. The only states that do not allow insurers to use your credit score for car insurance pricing decisions arre California, Hawaii, and Massachusetts. If you have bad credit and live in these states, you do not need to worry. However, you can expect to pay more for your car insurance if you have bad credit and live in any other state. 

It may seem unfair, but like with loans, car insurance companies have determined that clients with lower credit scores are more likely to miss their car insurance provider payments. As such, they will want to recoup their losses from their less creditworthy clients and will charge you more for having a bad score.  The lower your credit score, the more you can expect to pay for insurance. However, unlike loans, car insurance companies checking your credit score counts as a "soft inquiry" instead of a "hard inquiry," and your score will not drop as a result. 

If you have a good credit score, you can expect to pay less for your car insurance, except in the three states we mentioned. To raise your credit score, consider taking a look at some of our helpful blogs or get a credit builder loan with Possible. If you have bad credit, you can still have access to our loans. Our loans are much easier to pay off than our competitors and offer lower APRs than many of them as well. As you successfully pay back our loans, your credit score will rise. Building your credit with Possible could mean cheaper car insurance rates for you in the future!

Michael Collins

Michael has a passion for writing and has since brought that passion to Possible. He enjoys reading everything there is to know about film, sports, and finance. His studies in college allow him to be on the forefront of business knowledge so he can better inform his readers.

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