Five factors that affect your auto insurance payment are how often you pay your premium, your vehicle, your driving history, your credit history and your state's coverage requirements. Insurance companies use most of these factors to determine how likely you are to file a claim and thus how risky you are to insure.
Keep in mind that calculating insurance rates can be complex. Insurance companies use more than five factors when setting premiums, and the criteria used can vary by state. For example, your ZIP code, marital status, gender, and annual mileage can also be used to determine your insurance costs.
5 Factors That Affect Your Auto Insurance Payment
- Payment frequency: A monthly premium payment will obviously be a lower amount than a payment for a full year or six months. However, if you pay monthly, your payments will likely add up to a higher total premium because insurance companies charge more for installments. Your insurer may also offer a discount for paying your premium in full instead of monthly.
- Vehicle type: The type of car you drive can make your insurance go up or down, depending on the make, model, year, if it has certain safety features, or if it is heavily targeted for theft.
- Driving history: Having a clean driving record insures better prices for your insurance premium, but if you have accidents or traffic violations, like tickets for speeding and red light infractions, your auto insurance payment will be more expensive.
- Credit history: In most states, insurance companies use an auto insurance score when calculating premiums. Your credit history is used to generate your auto insurance score, so good credit results in a high auto insurance score and a lower premium, while the reverse is true if you have poor credit.
- State requirements: While liability insurance is required by law in most states, some states require additional types of coverage – like personal injury protection or uninsured motorist coverage – or higher coverage limits than other states, which can increase the cost of your premium.
Other Factors That Affect Your Auto Insurance Payment
- Age: Younger drivers are typically riskier to insure due to their lack of experience and are statistically more likely to get into car accidents, so their insurance rates are higher compared to middle-aged drivers.
- Location: Information about crime, traffic, and accidents in your ZIP code is used when determining how much you’ll pay for car insurance. Typically, drivers in urban areas pay more than rural drivers due to higher rates of crime, traffic, and accidents.
- Gender: In most states, male drivers under 25 years old often pay more for insurance than their female counterparts. The opposite tends to be true for middle-aged drivers.
- Marital Status: Insurance companies typically charge married drivers lower car insurance rates because they are statistically less likely to get into car accidents than single drivers.
- Annual mileage: The more you drive, the more likely you are to get into a car accident and need to file a claim. Since Americans drive around 14,000 miles per year on average, having a higher annual mileage can result in higher premiums.
To learn more, check out WalletHub’s guide on factors that affect car insurance rates.
This answer was first published on 02/14/23 and it was last updated on 02/18/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
Quick Answer
What are 5 factors that contribute to your auto insurance premiums? ›
What factors are most important for car insurance rates?
- Age. Age is a very significant rating factor, especially for young drivers. ...
- Driving history. This rating factor is straightforward. ...
- Credit score. ...
- Years of driving experience. ...
- Location. ...
- Gender. ...
- Insurance history. ...
- Annual mileage.
What factors affect car insurance rates?
- Driving record. Drivers with clean motor vehicle records and no at-fault accidents typically get the cheapest car insurance. ...
- Prior insurance. ...
- Credit history. ...
- Location. ...
- Age and gender. ...
- Vehicle.
Five factors that affect your auto insurance payment are how often you pay your premium, your vehicle, your driving history, your credit history and your state's coverage requirements. Insurance companies use most of these factors to determine how likely you are to file a claim and thus how risky you are to insure.
Why is car insurance going up in 2024? ›
Your particular driver profile, which includes factors like where you live, your age and your driving record, influences what you pay for car insurance. But rising car repair costs and an increase in disaster-related claims are significant reasons why car insurance rates are surging for many drivers.
Which 5 factors determine the premium amount? ›
- Age.
- Gender.
- Smoking.
- Health.
- Lifestyle.
- Family Medical History.
- Driving Record.
How insurance companies set health premiums. Five factors can affect a plan's monthly premium: location, age, tobacco use, plan category, and whether the plan covers dependents.
What five factors are most important in determining car insurance rates? ›
Understanding what determines your auto insurance premiums can uncover new ways to save. Auto insurance rates depend on factors such as your age, gender, location, the kind of car you drive, your driving record and possibly even your credit score.
Which of the following are factors that affect your auto insurance? ›
Some factors that may affect your auto insurance premiums are your car, your driving habits, demographic factors and the coverages, limits and deductibles you choose. These factors may include things such as your age and your driving record.
What are 4 factors that can affect the cost of life insurance policies? ›
The cost of life insurance is influenced by factors such as death benefit amount, type of policy, riders, age, gender, health, tobacco use, family history, lifestyle, and occupation.
The basic premium factor is the acquisition expenses, underwriting expenses, profit, and loss conversion factor adjusted for the insurance charge for a policy. The basic premium factor is used in the calculation of retrospective premiums and does not consider account taxes or claims adjustment expenses.
Does credit score affect car insurance? ›
On average, drivers with poor credit pay 118 percent more for full coverage car insurance than those with excellent credit. California, Hawaii, Massachusetts and Michigan prohibit or limit the use of credit as a rating factor in determining auto insurance rates.
What do insurance companies use to determine rates? ›
An insurance company's rates are based upon the claims they pay, operating expenses and profit. The rates you pay as an individual driver/owner are usually based on: The amount of coverage purchased. The amount of the deductible chosen.
Are car rates going down in 2024? ›
But after two years of increases, there are strong indications that auto loan rates could start to come back down in 2024 — perhaps by a substantial amount.
Are home insurance rates going up in 2024? ›
While an intense hurricane season has the potential to cause premium increases next year, Insurify predicts Americans will see a more modest premium increase of 6% in 2024, putting the average annual homeowners insurance rate at $2,522 by the end of the year.
Why is auto insurance increasing? ›
Higher overall auto prices and auto repair costs prompted insurers to start raising premiums as overall car values jumped. Price increases for insurance rates, like many other increases from food to clothing, have been sticky and are less likely to drop at the same rate as broader inflation, if at all.
What are the 7 factors the car insurance premiums will be based on? ›
Powered by:
- Your Location. Car insurance premiums vary from state to state, and even from one ZIP code to another. ...
- Your Age. ...
- Your Gender. ...
- Your Marital Status. ...
- Your Driving History. ...
- The Vehicle You Drive. ...
- Type and Amount of Insurance Coverage. ...
- Your Deductible.
The cost of homeowners and tenants insurance depends on a number of factors including:
- location, age and type of building.
- use of building (residence and/or commercial)
- proximity of fire protection services.
- choice of deductibles.
- availability of any premium discounts.
- scope and amount of insurance coverage.
Value of the insured vehicle: the higher the value of the car, the higher the premium. -Repair record of the car: the more easily car damage can be repaired, the lower the premium. -Your age: younger drivers have less experience and pay higher premiums.
