Factors Determining Auto Insurance Rates

The key car insurance factors for determining rates include driving record, credit score, and make/model of your car. Use our quote comparison tool to see how car insurance factors impact rates.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 19, 2021

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Here's what you need to know...

  • There are factors regarding you as the driver that will be used in determining your car insurance rate
  • The vehicle you use will make an impact on your rates
  • The insurance company you use will have an effect on your premiums

There are many key car insurance factors to consider so your insurance rate is not expensive. Car insurance companies look at two separate categories of information in order to determine your rate:

  1. Your driving history
  2. Factors involving your vehicle

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An important part of choosing car insurance involves looking at different factors of car insurance companies. Let’s go into each of these categories further in order to help you find the best car insurance at the lowest price.

Key Car Insurance Factors Regarding the Driver

– Driving Record

One of the main factors affecting your car insurance rate is your driving record. If you have been in an accident, especially a severe one, it is guaranteed that your rates will be higher. Insurance companies view driving records as reports on liability.

The more liability, the more risk an insurance company has to take to insure that driver. Taking classes that are authorized by local motor vehicle administrations is the best advice to improve your driving record.

By not speeding, driving intoxicated, and participating in activities that add points to your driving record, your record will eventually improve and you will qualify for lower car insurance rates.

– Credit Score

Poor credit also affects your car insurance rate. Most people find this unfair as credit seems to have nothing to do with good driving. Regardless of why car insurance companies do this, people with bad credit will pay more for car insurance.

If you want to lower the cost of your insurance, settle old debts and then reapply for insurance after your credit rate has improved.

– Grades

Another factor in your car insurance rate, if you are a student, is your school grades. Students with higher grades have a much higher chance of getting a lower insurance rate.

Insurance companies tend to believe that taking responsibility in the classroom leads to students taking more responsibility on the road.

– Vehicle Use

The distance and how often you drive is also a part of what car insurance companies consider before deciding your rate. Car insurance companies assume that the farther you drive and the more you do it, the more likely you are to have an accident.

– Age

The last factor car insurance companies use to determine your rate is your age. Car insurance is always more expensive to people under 25.

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Key Car Insurance Factors Pertaining to the Vehicle

– Safety Features

Insurance providers want to know whether your car is equipped with necessary safety features expected from every vehicle.

Things like anti-lock brakes, airbags, daylight headlights, and safety belts are all considered when determining your insurance rate. The more safety features your vehicle has, the lower the insurance vehicle will be.

If you have options to install some of these safety features at your dealership, purchasing them will save you money in the end.

– Make and Model of the Vehicle

There are a number of different factors dependent on what car you have. First, having one of the cars most commonly stolen will raise your rates.

Insurance companies have statistics of which cars are most often stolen or broken into, and these vehicles are much more expensive to insure.

– Initial Cost of the Vehicle

If you have an expensive car, the insurance rates will be much more expensive. Used cars typically have much lower premium rates because they are cheaper to repair.

– Other Car Factors

Insurance companies often consider other criteria as well, some that you may not be able to do anything about. Things such as whether your car is equipped with run-flat tires and even the color of your car can be a determination of your insurance rate.

Key Car Insurance Factors Involving the Insurance Company

– Quality Coverage

Quality is the most important factor when determining which insurance company to use. Your coverage should be the most beneficial to you and your vehicle.

However, it is also necessary to look at the price of the policy the insurance company is offering you. In the majority of cases, high-priced policies do not necessarily imply higher quality coverage or services.

– Company Stability

Car insurance companies run just like other businesses. This means that they can also go bankrupt or become financially unstable. The insurance company you choose should be stable, a proven track record, and expertise.

Otherwise, it can become difficult to receive your claims if you need them. You can determine the stability of your insurance company by looking at its ratings. The

The A.M. Best, Standard and Poors, and Moodys ratings provide in-depth research about the financial stability of an insurance company.

– Customer Service

A great car insurance company consists of highly dedicated agents. Aside from this, agents should also be knowledgeable and skilled about their job.

Quality customer service shows a lot about an insurance company. It will show how willing the company is to work with their clients.

All of these are key car insurance factors that are involved in the car insurance policy and determining the rate for each car.

Knowing what car insurance companies look at when determining your rate and knowing what to look at when determining which car insurance company to use will help you achieve the best quality insurance for your vehicle at an affordable price.

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