The Factors Behind Auto Insurance Rates

Factors affecting car insurance rates are mostly influenced by risk. Your driving record, type of car, safety features its equipped with, and where you live are some of the biggest factors.

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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 29, 2021

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Here's what you need to know...

  • Car insurance companies consider a variety of factors when calculating your auto insurance rate
  • New drivers, with their clean slate, have the advantage when it comes to auto insurance rates
  • Overall, safety trumps any other factor influencing your auto insurance rate

In order to determine your insurance rate, car insurance companies use a variety of factors. They use these same factors to determine the discounts that you will receive.

What factors affect car insurance? If you are a new driver, the factors used to determine your rate are entirely different than the factors used to determine the insurance rate for an experienced driver. Each car insurance company has similar criteria that they use to determine this rate.

For example, for new drivers, these factors are used to determine their rate:

  • Driver’s age
  • Type of car that they are driving
  • The number of driving courses taken

What can you do to make your insurance rates go down? For older and more experienced drivers, the number of tickets obtained and the number of accidents on their record are used to determine the insurance rate as well as a myriad of other factors.

New drivers have an advantage when it comes to obtaining their car insurance rates and premiums. They are starting off on a clean slate.

The insurance rate will initially be a bit high, especially if the driver is a teen. Teen drivers pay high car insurance rates and young male drivers pay high insurance rates too.

However, with a good driving history and little or no points on the license, new drivers will find that the high premiums will decrease drastically within a pretty short amount of time.

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Keep A Clean Driving Record

A clean driving record is the easiest way to keep your insurance rate low.

Not only are risky driving practices life-threatening, these practices greatly increase the amount of money that you pay for car insurance.

The following are surefire ways to destroy your driving record and drastically increase your car insurance rate:

  • Fast driving
  • Running stop signs
  • Disobeying traffic rules

Make it a regular practice to drive as safely as possible, and emphasize safe driving to everyone in your household on a regular basis.

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Stay Clear Of Expensive Vehicles

Does car value affect insurance? If you are concerned about the cost of your car insurance premiums, you probably should not go out and purchase a Lamborghini, Ferrari, or any other expensive, flashy car.

Those who can truly afford these vehicles typically are not concerned about insurance costs. It is not wise to be flashy if you simply can not afford it.

Only purchase a car that you can truly afford.

That is the best way to get an insurance rate you can comfortably pay each month.

Drive A Vehicle With Enhanced Safely Features

Discounts are given on vehicles with enhanced safety features such as:

  • Alarms
  • Anti-lock breaks

When shopping for a vehicle, try to find a car that has a myriad of safety features.

Car insurance companies look favorably upon safe vehicles which can easily translate into great savings for you. Not only will you feel safer in your car but you will also be saving money.

Live In a Suburb or Rural Area

Those who live in areas which are less populated pay substantially less for their insurance premiums. If you live in a large city such as

If you live in a large city such as New York City, you will pay a great deal more for insurance because there are many more drivers on the road, more pedestrians on the road, more public transportation, and more traffic overall.

A larger population leads to more accidents, and insurance companies have the statistics to prove it.

Moving to a suburban area will not only take you away from the hustle and bustle of city life, it will give you the ability to save money on both housing and on your car insurance rate.

There are other factors that affect the cost of your insurance premiums. These factors are not based on your driving history or the year make and model of the vehicle that you drive.

Some of these factors include:

  • Age
  • Marital Status
  • Gender
  • Vehicle use (Personal or business use)
  • How many miles you drive each day
  • Number of drivers
  • Number of drivers under 21

There are many who feel that these factors should not be used to determine car insurance rates. For example, there are many who feel that women should get the same insurance quotes as men.

However, insurance companies have statistics that prove that women get into fewer accidents than men overall; therefore, they feel that a reduced rate for women is justified.

Also, the elderly are generally quoted higher rates even though they have more driving experience. Regardless of experience, statistics prove that elderly drivers get into a substantial amount of accidents each year.

Insurance rates are solely based on the assessment of risk. Lowering your risk is the best way to lower your insurance premium.

Sure, there are certain factors that you can not help, such as your age and gender. However, there are many things that you can do that will ensure that your insurance rates stay as low as possible.

The easiest method of keeping your insurance rate low each year is to keep points off of your driver’s license by driving as safely as possible at all times and by obeying your state’s traffic laws each time you get behind the wheel.

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