How Are Auto Insurance Rates Determined?

Your driving habits affect insurance premiums.
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If you start comparing auto insurance rates with your friends, you're likely to find a wide range of premiums. It might seem like the insurance company randomly picks rates for different customers, but there are actually several specific factors that influence the rates. Understanding what determines auto insurance rates can give you some insight into possibly lowering the amount you pay each month to keep your car insured.


All those personal facts that make up who you are also influence your auto insurance rates. Age, marital status, gender, occupation and education can all affect your insurance premium. Most companies charge more for drivers under 25. You might notice a drop in your premium once you hit that magical age if you aren't there yet. Women sometimes get lower rates because they are considered to be safer drivers. Being married might also decrease your insurance premiums, just as having an advanced degree might also mean lower rates.


Your location plays a role in insurance premiums, mainly due to differences in traffic patterns in different areas. For example, if you live in a rural area with fewer cars on the road, your chances for an accident go down compared to someone who lives in a crowded city full of vehicles. A rural driver might have lower rates than her city-dwelling peer. Living in an area with higher rates of auto thefts or burglaries might also cause you to pay more to insure your vehicle.

Driving Habits

The insurance company won't hire a private detective to monitor your driving habits, but it will check up on any prior violations or accidents. Past moving violations often bump up auto premiums because they indicate you are more likely to be involved in an accident. That old speeding ticket or reckless driving charge will likely come back to haunt you. Prior accidents can also come back to bite you in the form of higher insurance premiums.


The vehicle itself influences the insurance rates. The safety of the vehicle is a big factor in determining premiums. A safe vehicle with additional safety features, such as side airbags, means less risk of injuries occurring if there is an accident. This translates to lower insurance premiums. The value of the car also plays a role. If a vehicle would cost a lot of money to repair after an accident, you'll have to pay higher insurance premiums. Certain vehicles are also more likely to be stolen, another reason for increased rates.


You probably know that your credit report affects your rates for loans, but it can also play a role in your auto insurance rates. Many companies now pull your credit report as a means to assess your responsibility and risk. Poor credit is sometimes associated with greater general risk, meaning you could pay for past or present credit problems on your insurance premiums.

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