How Insurers Calculate Your Car Insurance Rate

There are many factors that affect auto insurance rates, such as your driving record, coverage type, age, and the type of vehicle you drive. While some factors like age can’t be changed, clean up your driving record, lower your coverage, and carefully consider your vehicle to find cheaper car insurance. Drivers can also take advantage of discounts and raise deductibles for the most savings.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Insurance Feature Writer Rachel Bodine

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Jun 6, 2022

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What You Should Know

  • Many factors, such as your driving record and age, affect your auto insurance rates
  • Where you live, the type of car you drive, and the coverages on your policy also affect your rates
  • Save money on auto insurance by maintaining a clean driving record, taking advantage of discounts, and lowering coverage amounts

Each auto insurance company uses its own formula to calculate rates. However, even the best auto insurance companies consider your driving record, your age, and the type of car you drive to determine your rates.

Other factors that affect auto insurance rates include where you live, how many miles you drive, your credit score, and the type of coverage you have.

No matter how your personal characteristics stack up, you can save money on auto insurance by adding discounts to your policy, keeping a clean driving record, and lowering your coverage amounts.

Keep in mind that each insurer from a top auto insurance company will weigh your factors differently. Therefore, shop around to find the best coverage with the lowest rates.

Continue reading to learn more about the characteristics that affect car insurance rates. Enter your ZIP code to compare free auto insurance quotes from nearby companies to find your best deal.

How do auto insurance companies calculate rates?

Auto insurance companies operate according to risk. They scrutinize various factors to determine how likely you are to cost them money by causing an accident. They also inspect your vehicle to determine how costly it will be to repair or replace if damaged.

The more likely you are to cost your insurance company money, the higher your rates will soar.

However, not all insurance companies are influenced by the same factors. Although most auto insurance companies examine the same characteristics, only some of them will charge similar rates.

For example, let’s say that you have a speeding ticket on your driving record. While one company may charge you higher rates, another company is willing to overlook that one ticket if the remainder of your driving record is flawless.

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What factors affect auto insurance rates?

While it may appear that auto insurance companies magically determine your rates, that’s not the case. Instead, numerous factors go into calculating your rates.

So, what factors are taken into account when deciding on insurance rates? It might surprise you to discover what your car insurance company considers and which of the following affects your car insurance rates the most.

Factors that affect auto insurance rates include:

  • Mileage – Drivers who spend more time on the road are more likely to become involved in an accident.
  • Zip code – If you live in a city with a high traffic volume and theft rate, your auto insurance rates will be higher.
  • Credit history – Drivers with a good credit score are less likely to file a claim and more likely to pay for damages themselves.
  • State requirements – Each state has a different requirement for car insurance coverage, and rates are higher for additional coverage.

Your vehicle is another significant factor that determines your rates. Is insurance less expensive for new cars?

New and expensive cars are more costly to repair, so insurance companies may charge higher rates. On the other hand, according to MyCarDoesWhat.org, newer cars have more safety features that help you avoid accidents. These safety features can actually lower your rates.

There is also some misinformation out there about your vehicle and insurance rates. For example, why are red cars more expensive to insure? The simple answer is that they aren’t. The color of your vehicle doesn’t affect your auto insurance rates at all.

Next, let’s examine the two biggest factors that affect your auto insurance rates.

How does your driving record affect auto insurance rates?

Every driver knows that tickets and accidents are costly. However, how your driving record impacts your insurance rates might surprise you.

This table reveals average annual rates from top auto insurance companies based on driving records.

Average Annual Auto Insurance Rates by Driving History
CompanyAverage Annual Rates with Clean RecordAverage Annual Rates with 1 AccidentAverage Annual Rates with 1 DUIAverage Annual Rates with 1 Speeding Violation
Allstate$3,819.90$4,987.68$6,260.73$4,483.51
American Family$2,693.61$3,722.75$4,330.24$3,025.74
Farmers$3,460.60$4,518.73$4,718.75$4,079.01
GEICO$2,145.96$3,192.77$4,875.87$2,645.43
Liberty Mutual$4,774.30$6,204.78$7,613.48$5,701.26
Nationwide$2,746.18$3,396.95$4,543.20$3,113.68
Progressive$3,393.09$4,777.04$3,969.65$4,002.28
State Farm$2,821.18$3,396.01$3,636.80$3,186.01
Travelers$3,447.69$4,289.74$5,741.40$4,260.80
USAA$1,933.68$2,516.24$3,506.03$2,193.25
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Accidents, tickets, and DUI infractions can drastically increase your auto insurance rates. In addition, drivers with multiple offenses will notice their insurance rates skyrocket.

Obeying traffic laws and avoiding accidents can save you hundreds of dollars per year.

Do your age, gender, and marital status affect your auto insurance rates?

Did you know that your demographics can affect your insurance rates? For example, your age, gender, and marital status can all be used to calculate your rates.

Older drivers have more experience on the road and are less likely to be involved in an accident. Along those lines, females and married people are less likely to take driving risks.  As a result, they earn lower rates.

This table discloses average annual rates from top auto insurance companies based on age, gender, and marital status.

Average Auto Insurance Rates by Demographic
Rates by Demographic Single 17-Year-Old FemaleSingle 17-Year-Old MaleSingle 25-Year-Old FemaleSingle 25-Year-Old MaleMarried 35-Year-Old FemaleMarried 35-Year-Old MaleMarried 60-Year-Old FemaleMarried 60-Year-Old Male
Nationwide$5,756.37$7,175.31$2,686.48$2,889.04$2,360.49$2,387.43$2,130.26$2,214.62
Allstate$9,282.19$10,642.53$3,424.87$3,570.93$3,156.09$3,123.01$2,913.37$2,990.64
American Family$5,996.50$8,130.50$2,288.65$2,694.72$2,202.70$2,224.31$1,992.92$2,014.38
Farmers$8,521.97$9,144.04$2,946.80$3,041.44$2,556.98$2,557.75$2,336.80$2,448.39
GEICO$5,653.55$6,278.96$2,378.89$2,262.87$2,302.89$2,312.38$2,240.60$2,283.45
Liberty Mutual$11,621.01$13,718.69$3,959.67$4,503.13$3,802.77$3,856.84$3,445.00$3,680.53
Progressive$8,689.95$9,625.49$2,697.73$2,758.66$2,296.90$2,175.27$1,991.49$2,048.63
State Farm$5,953.88$7,324.34$2,335.96$2,554.56$2,081.72$2,081.72$1,873.89$1,873.89
Travelers$9,307.32$12,850.91$2,325.25$2,491.21$2,178.66$2,199.51$2,051.98$2,074.41
USAA$4,807.54$5,385.61$1,988.52$2,126.14$1,551.43$1,540.32$1,449.85$1,448.98
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Auto insurance rates decrease significantly with age. Also, there are seven states that don’t allow insurance companies to consider gender when determining auto insurance rates.

How can you lower auto insurance rates?

If your personal factors cause your auto insurance rates to increase, don’t worry. There are ways to lower your rates and save money.

First, examine your driving record. If you have accidents, tickets, or DUI infractions, clean up your record. Although you can take a defensive driving course to obtain a discount and remove points, it’s important to drive safely in the future. Avoid adding more infractions by driving safely and obeying traffic laws.

Next, take advantage of auto insurance discounts. Every company offers various discounts based on the driver, policy, and vehicle. Bundle discounts that you are eligible for to receive the most savings.

Then, carefully consider your coverages and deductibles. Calculate whether or not you need full coverage and add-ons like roadside assistance. And then remove any unnecessary coverages.

Your deductible is the amount that you have to pay for damages, before your insurance company pays a claim. Raising your deductible will lower your auto insurance rates.

However, lowering coverage and raising your deductible means that you will have to pay more out of pocket if your vehicle is damaged.

How Auto Insurance Rates are Calculated: The Bottom Line

Auto insurance companies consider factors such as your driving record, your demographics, and your vehicle when determining your rates. However, each company will calculate your rates differently.

While some auto insurance companies are willing to overlook certain factors, others will charge you higher rates. This inconsistency makes comparison shopping a must.

Now that you know what factors affect auto insurance rates, you can shop around for the best deal for you. Enter your ZIP code now to compare auto insurance quotes from companies in your area for free.

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