Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Aug 12, 2021

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Key takeaways...

  • First, you really need to educate yourself about car insurance and understand that car insurance premiums are calculated based on many risk factors
  • While it is true that every auto insurance company has a different formula for calculating risk there are many common factors, car make/model, age, which all car insurance companies use to determine your risk level
  • Every mistake you have made as a driver will likely be counted against you. From moving violations to your accident record, these types of incidents increase your risk of higher premiums

You hear advertisements about cheap car insurance and car insurance discounts almost every day, but how do you actually take advantage of these lower rates?

The first thing you need to know is how insurance companies calculate risk. Every insurance company underwrites a little differently. This can lead to drastic differences in the average rate for the same driver.

Car insurance companies have spent millions of dollars devising formulas to asses your risk as a driver well before you even walk into the office of a car insurance agent. There is no single underwriting standard in auto insurance. Even within the same company, there is some degree of subjectivity. Some underwriters may be more conservative while others may be more forgiving of certain things.

While it is true that every auto insurance company has a different formula for calculating risk, there are many common factors which all car insurance companies use to determine your risk level.

Many times these factors are well within your ability to control. So before buying a new car or shopping around a new policy, let’s learn more about how these companies calculate risk.

Before we go any further, remember that contacting a car insurance company for a car insurance quote is always best BEFORE you buy a car, not when you are sitting at the car dealership signing the purchase agreement.

Use our FREE quote tool to compare auto insurance rates todayThere is no such thing as a reliable car insurance calculator.

How Does your Driving History Affect Monthly Payments?

Risk is the number one word used by all car insurance companies to calculate the cost of insuring you.

Whether its health insurance or car insurance, your risk factor is the ultimate determination of your auto insurance premiums and whether or not you will even be approved for an insurance policy.

Every mistake you have made as a driver will likely be counted against you. From moving violations to your accident record, these types of incidents increase your risk of higher premiums.

You can limit your exposure to higher insurance premiums by following posted speeding limits and following the rules of the road. If you don’t have a spotless record, you can also look into defensive driving classes and telematics programs. These programs track specific behaviors to determine how safe a driver you might be, and they issue discounts accordingly.

Some companies have an accident or ticket forgiveness program as some companies allow a single violation not to affect your rate. You need to have a clean driving record to qualify for these programs, though. The more tickets you have, the more your rates will rise.

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Will Theft Prevention Devices Lower Your Auto Insurance Rate?

What if you had a car that was stolen? This type of claim deems you as very high risk as insurance companies view your ownership of a car as riskier than those who have not had cars stolen. If you live in a high crime neighborhood, your rates may already be higher. If there’s an auto theft on your record, your rates will climb higher.

Of course, most people can not prevent auto theft. However, some can. You can lock your doors, park in a well lit place, etc. An alarm or anti-theft system is much like other safety features. Some are designed to help you avoid an accident by alerting you to a possible collision or even steering you away from potential accidents. An anti-theft device may lower your rate by preventing theft or helping you recover your car after a theft.

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Does The Make and Model of Your Car Matter to Insurers?

Yes. The type of vehicle you drive plays a large role in the calculation of your car insurance premiums. This will determine what types of coverage you need, and it plays into your risk level. Some cars are built to protect you from avoidable accidents. Others are designed to protect you from severe injuries in an accident. Safer cars cost less to insure.

Other factors may be more obvious. For example, if you own a luxury car, your replacement cost is higher. So you’ll pay more for a newer car in some ways than older ones. This is often counterbalanced by the discounts of a newer car with more safety features. The type of car matters too.

Sports cars are faster and statistically involved in more accidents than Minivans. They have fewer safety features, and they’re more likely to have certain features that increase risk. So again – the car you choose will provide a single baseline of cost before you (as the driver) are factored in.

How much of an affect does your car have on cost? Only your car insurance company can tell you. So it’s important to contact an agent before you buy a new car. You can compare quotes online with different cars. Before you sign up for a policy, though, you should get your car’s VIN to get all applicable discounts.

How Does Driver Age Affect Auto Insurance Rates?

In the auto insurance world, age is equal to experience so regardless of your age, a car insurance company is not really discriminating by charging more based on your number of years behind the wheel.

This is not something you can fast forward but it is something you should always factor in when buying a new car.

Usually, after 25 you become what is referred to as a mature driver and the penalty for being a young driver is gone. So if you have a clean driving record, you could see your auto insurance rates drop dramatically.

Some auto insurance companies offer further discounts for “mature drivers” they define as including seniors who have clean driving records. Your biggest age-related penalty will be while you’re young due to the innate lack of experience.

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How Can You Find Affordable Auto insurance?

If you’re looking for auto insurance, you should always compare your options. Your driving record, zip code, type of coverage, and various other factors can increase or decrease your auto insurance rates. Even credit scores play a role in how much you pay. No matter what your application looks like, the important thing is to get multiple quotes and compare your options. This is the only way to make sure you always get the best auto rates.

Learn more about common car insurance discounts available and compare rates with our free quote tool below now!