Top 7 Factors That Affect Auto Insurance Rates (2024)

The top factors that affect auto insurance rates include shopping for quotes, coverage choice, and much more. For example, while liability insurance costs around $45/mo on average, you’ll pay $119/mo for full coverage.

Read More: Cheap Full Coverage Auto Insurance

While understanding that great auto insurance could save you from financial ruin is one thing, knowing what to consider while you shop for coverage is just as important. Enter your ZIP code into our free quote tool above to get started on finding cheap auto insurance.

#1: Shopping for Auto Insurance Quotes

While shopping for car insurance may not be the first thing you want to do in your spare time, by doing a little research beforehand, it can be a quick and rewarding experience.

Of course, before you start shopping, it’s important to consider your budget and the amount of car insurance you can afford. Even if money’s not tight, you probably have other things like the kid’s college fund or retirement that you’re saving for. Look at your overall budget and determine how much you can spend on insurance.

So, in other words, it’s better to have a little too much coverage rather than not enough.

Car insurance rates vary depending on the driver and their circumstances. However, some groups of people should be prepared to pay more for their car insurance. For example, if you’re a teenage driver, you’ll need to budget for higher insurance premiums than any other age group.

According to the National Highway Traffic Safety Administration, teen drivers are three times more likely to be involved in a fatal car crash than other motorists are. As a result, insurance companies charge them more, as a means to offset their potential costs.

Even if you’re an adult, but haven’t been driving for long, you’ll also pay higher premiums. If your budget is tight, you may want to consider agreeing to a higher deductible, so that your premiums are less.

The deductible is the amount of money you’re required to pay towards an insurance claim. If your deductible is $200, you’ll have to pay $200 towards the repairs when you make a claim. The higher the deductible is the less an insurance company has to pay towards the overall costs. Just make sure you can come up with the money for the deductible if you need to.

If you can swing it, pay your insurance premiums bi-annually or annually rather than monthly. Most insurance companies charge customers a little more to pay monthly.

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#2: Coverage Choices

Another important factor that affects auto insurance rates is the coverage types and amount you choose to buy.

Nearly every state requires drivers to have liability insurance for your car, which pays for the damages another person or property incurs in an accident you cause. Liability insurance will also help pay for your legal defense and court costs if you need it.

So while high liability limits in a state like Florida may result in higher rates, other states have fewer requirements, making liability-only auto insurance cheaper.

However, there are several other types of auto insurance coverage to consider. Collision auto insurance will pay for the repairs your car needs from an accident you cause, and comprehensive insurance will cover damages that don’t involve another motorist.

If you’re looking for even more coverage then you may want to consider buying personal injury protection (PIP) auto insurance. This type of insurance covers medical costs from an accident that aren’t covered by a person’s health insurance, regardless of fault. In addition, some PIP policies will help cover lost wages and other expenses a person might have because of a serious accident.

Of course, the more coverage you buy the higher your premiums will be, but having the right amount of insurance to protect you and your family is extremely important.

While you’re considering how much insurance you actually need, ask yourself several questions. Do you drive a lot each day and for long distances or drive frequently in heavy traffic? Do you live in a highly populated area? Or in a region prone to extreme weather?

Organizations like the National Association of Insurance Commissioners provide consumers with information about auto insurance and the various types of coverage.

#3: Vehicle Type

Another key factor to consider is the type of car you drive. You’ll pay higher rates for an expensive vehicle, since it costs more to repair. In addition, flashy and luxurious cars have a greater chance of being stolen, which is another reason why insuring them will cost more.

So, consider auto insurance for older cars to achieve lower rates.

Insurance companies also review statistics to see which cars don’t have good safety ratings and are involved in more accidents as a result. If providers believe your vehicle is less safe than other models, your premiums will be higher.

#4: Driving Record

Your driving record will also play a big factor in your search for auto insurance. If you’re a responsible driver who hasn’t caused any accidents and hasn’t received any traffic tickets, then finding cheap auto insurance will be a much easier task.

If you’ve been responsible for a car crash, however, and have received a speeding ticket or two then insurance providers will charge you much more. In fact, people who have extremely bad driving records may have trouble finding a provider to insure their car. Drivers who are considered high-risk may have to purchase a more expensive, non-standard policy.

Learn More: Best Auto Insurance Companies for High-Risk Drivers

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#5: Credit Rating

While your credit rating may not indicate whether you’re a good driver, it does show insurance companies if you pay your bills on time. You’ll pay higher rates if you have a low credit score or regularly miss premium payments.

Read More: How Credit Scores Affect Auto Insurance Rates

If you’ve had your car insurance cancelled in the past due to non-payment, you may have trouble finding coverage altogether.

Even if you’ve never had trouble making your car insurance payments, but have fallen behind with your mortgage or credit card bills for example, then providers may see you as a risk to insure.

If you have a good credit rating, on the other hand, then insurance providers can trust that you’ll pay your premiums on time and will charge you less.

#6: Location

Where and how often you drive affects the amount of insurance you need but so does the state you live in. Not only does the minimum requirement for liability insurance vary from state-to-state, but also some jurisdictions require drivers to purchase other policies like PIP insurance. Compare auto insurance rates by ZIP code here.

Insurance providers are required by law to tell customers what the minimum requirements are. You can also find out by contacting your state government. The department that oversees car insurance in your region depends on what state you live in. For example, in North Dakota, it’s the Insurance Department.

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If you live in a state that’s prone to extreme weather, like tornadoes or hurricanes, you also may have to pay more than someone who doesn’t.

In addition, if you live in a state that has poor roads and has many car accidents annually, insurance providers may charge higher prices.

#7: Available Discounts

Another important auto insurance price factor to consider is whether you qualify for an auto insurance discount. If you have a good driving record and have been a reliable customer, insurance companies may offer you a discount to attract or keep your business.

If one provider offers you a discount, be sure to mention it to their competitors to see if they’ll match it.

If you’re a full-time student with good grades you may also qualify for a good student auto insurance discount. Many companies offer them to students who have a B average or higher overall. Many providers also offer discounts to veterans as a way to thank them for their service.

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Understanding What Impacts Your Car Insurance Premiums

Many factors, including coverage options, vehicle type, and location, all get considered by insurers when setting your rates, and companies all weigh each factor differently.

Now that you know many of the various factors that affect rates, enter your ZIP code into our free quote comparison tool below to shop for coverage from the top providers in your area.

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