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: Sep 29, 2020

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Key takeaways...

  • Car insurance payments vary from state to state and from driver to driver
  • Insurance companies use a long list of rating factors to assess the risk on your application, and one or more of these rating factors is going to be different
  • Having a bad driving record could be a sign that you are inattentive, aggressive, or even reckless when you are operating your car

Car insurance payments vary from state to state and from driver to driver. If you are in the process of shopping for a new policy because you have recently relocated or because you have a new four-wheeled addition, it is time to start budgeting for new car insurance expenses.

There is a major misconception that car insurance premium costs are based on only the value of car that you are covering. While vehicle type does a play a role in figuring payment amounts, companies look past the surface information and dig deep to decide how much money an applicant should pay.

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Not only will an insurance carrier consider details surrounding the type of car that you are insuring, the company will also use a combination of different facts to classify you as a major risk or a minor risk.

The riskiest of applicants will pay the highest premiums, and the drivers who are statistically least likely to file a claim will receive premium breaks.

This is why you should set aside time to learn about how risk is classified and how payments will ultimately be decided. Read on, and learn about what really affects car insurance premiums.

Table of Contents

Why Your Payments Are Higher or Lower than Someone Else’s

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You will never pay the same exact rates as someone that you know. Your payments could be just dollars different, but even when you have the same carrier, they are not going to match.

One of the reasons for this is because not every single factor will be the same across the board. Insurance companies use a long list of rating factors to assess the risk on your application, and one or more of these rating factors is going to be different.

If you have the same vehicle, you more than likely will have different lengths of experience.

If you have the same years of experience, your location or your driving record will more than likely differ.

You need to know how each and every major rating factor affect rates so that you can truly understand why your payment is so much higher than your best friend’s, your sister’s or your aunt’s payment.

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How does your location affect your premiums?

One major rating factor is location. Location affects premiums is multiple ways. Premiums are based on your state, but they are also affected by the zip code where your vehicle is parked.

If you were to compare the average premiums by state, you would find that these average expenditures vary dramatically.

The national average expenditure is $815 per year, with the lowest premium coming in at $632 and the highest coming in at $1219.

There are multiple reasons why the expenditures are so very different from state to state. One of the biggest reasons is because the laws surrounding car insurance are set by state officials.

Why does the state you reside in matter?

When one state requires higher limits than another, the average cost of insurance will be higher. In addition to this, the state officials set the laws about what can affect premiums, and some states are much stricter than others.

For example, many states check credit to calculate premiums, but there are states that have made credit-based insurance scores illegal.

In these states, people with poor credit are not penalized for bankruptcies or defaults and people with excellent credit do not receive special credits.

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How does your zip code affect your car insurance payments?

Zip code also plays into risk. You may wonder how living just digits off from the city next to you could affect your rates, but the answer has to do with how claims are reported in the area.

If you live in a zip code where there are a high level of burglaries or vehicle thefts reported, the rates for your insurance could be high.

Conversely, living in an area with a low level of claims can work in your favor. While population does not always affect rates, highly populated areas tend to have high claims rates and higher crime rates.

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How does the car you drive affect insurance payments?

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If you buy a luxury car, many assume that you will pay a luxury premium. Vehicle values do not directly affect standard car insurance rates, but they can indirectly have an effect.

Instead of using the purchase price of a car to decide how much your payment is going to be, the insurer will use what is called a safety record. The safety record of a vehicle, in short, is how the car performs in safety tests.

All insurers will use the results from crash tests conducted by the Insurance Institute for Highway Safety to see if a vehicle causes a great deal of damage in a collision or sustains more damage than the average car.

The company will also use claims records from the past to see how much it costs to repair a specific make or model.

For expensive cars or rarer vehicles that have parts that are expensive, payments for physical damage cover tend to be higher because the company’s burden is higher.

How does driver demographics and driver records affect payments?

A high-risk driver will always pay higher premiums for the same amount of coverage than someone who is considered to be a safe driver. There are a number of different reasons why you can be labeled as high risk.

Drivers who are inexperienced, young, or who have serious violations on their record are risky.

Many companies will also include drivers who have a history of driving without insurance into the category as well.

When you are high risk, shopping around is imperative because some companies will not cover you and some companies will take advantage.

Even standard drivers need to shop around for their car insurance so that they are able to find the lowest payments without compromising protection.

Before you begin to comparison shop, learn why your agent asks all of the seemingly obvious questions when you are getting a quote.

Driving Experience

If you have ever been asked “At what age were you licensed?”, it is important to answer honestly. Some are licensed right at 16 and others wait until 18 or even 21.

The company will run your driving record and see if you are honest, but the initial quote will be based on how you answer. Typically speaking, drivers with under 3 years of experience are high-risk because of their lack of experience.

After you gain experience, your rates will start to drop. In some states, rates drop because of your age and your experience.

In most cases, when you are 25 or you have 9 years of experience behind the wheel, you will no longer be penalized for age or experience.

Luckily, you can take advantage of discounts for being a good student or a trained driver in the meantime. If you have been licensed in a prior state, always tell the agent your other license number for the experience credits.

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Driving Record

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The driving record can have a significant effect on your car insurance payments. Having a bad driving record could be a sign that you are inattentive, aggressive, or even reckless when you are operating your car.

This is why you will always be asked if you have moving violations or previous accidents when you are requesting premiums quotes.

If you have a citation, the citations will almost always be called surchargeable for 36 months following conviction. This means that the insurer can charge you higher premiums for this time period. Some more serious convictions, like DUI or reckless driving, carry longer surcharges.

Accidents tend to affect premiums only when you were deemed at fault. If you were not the driver and the driver does not live in your home, the accident does not need to be counted.

If you, however, were at-fault, the accident is chargeable and can raise rates for 3 years if the damages exceed the state’s threshold. This is why traffic school is so important when it is offered.

If you are unsure of your record, ask your current company for a letter of experience so that you can review it on your own.

Accidents carry more weight than minor speeding violations, but when the two are combined you can lose your Good Driver eligibility.

The only way to find out how much you are going to pay for your own coverage is to comparison shop. You can start comparing car insurance rates by using our FREE quote tool below! Be sure that you research the insurers and find only the most reputable companies to buy from.

After you compare satisfaction and complaint indexes, you can look at the price and find out how much your payments will be with a specific premier provider.