Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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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 Chris Harrigan

UPDATED: Apr 13, 2022

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Here's what you need to know...

  • Many items are gathered by car insurance companies to help them decide how much of a premium you will need to pay for auto insurance
  • Also, there are several factors that car insurance companies cannot use to determine the price of your policy
  • If a driver needs to lower their car insurance premium, they should consider doing some comparison shopping, reducing their coverage, and increasing their deductibles
  • Inquiring about any available discounts, improving credit, and your driving records can all help decrease the premium that you pay for car insurance coverage

While getting a car insurance quote isn’t quite like applying for credit or financing, there are several factors that car insurance carriers examine to determine your insurability and what rate you will pay.

If your current auto insurance rate is too much for your budget, it is time to try an online price comparison tool.

These tools allow drivers to compare several different auto insurance companies, policies, and rates all in one easily accessible place. Enter your zip code into our FREE comparison tool to get started!

Auto Insurance Premium Factors

Most auto insurance carriers will look at many different factors when determining if they will insure a driver and how much of a premium they will pay for the policy.

In general, insurance underwriters use these factors to determine how much of a risk they are taking by providing a particular driver with an insurance policy.

If they are taking a small risk, the driver will usually be assigned a lower premium. Drivers who are more of a risk to an insurance company will pay higher premiums.

The majority of car insurance carriers will look at these factors before insuring any driver:

Driving Records

Most drivers are probably aware of this factor. Past driving behaviors can predict future behaviors. Therefore, drivers who have recently had tickets or filed claims on their auto insurance can expect to see higher premiums.

On the other hand, drivers who have a clean driving record will likely be rewarded with a more affordable premium on their policy.

Frequency of Vehicle Use and Mileage

If you drive your car each day to work, and your round trip mileage is 50 miles, you will be assigned a higher premium than someone who only works a few days a week or who only drives 10 miles to work round trip.

The more you drive, the higher the risk of an accident occurring and the insurance company having to pay out on a claim.

Where You Live

Unfortunately, cars are worse off in some zip codes than they are in others. If you live in an area that is more prone to car thefts, vandalism, claims, or accidents, you will usually end up paying a higher premium than drivers who live in safer areas.

Where You Park

Vehicles that are parked inside of a garage when not in use are safer and less likely to be stolen or vandalized compared to vehicles that are left out in the open.

Also, vehicles stored in garages are less likely to be damaged by weather-related conditions. These factors make drivers who have cars that they do not routinely park in a garage pay a higher premium than people who do.

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Your Age

Teens and drivers under 25 will have higher premiums because of their inexperience and also their willingness to take on riskier behavior

Your Gender

Men, especially unmarried men, will pay higher premiums for their car insurance policies because they are more prone to riskier driving behaviors.

The Type of Car Being Insured

Some cars cost more to replace and others are more accident prone. Insurance carriers take these factors about your car into consideration when deciding on your auto insurance premium.

Your Credit History

Perhaps the most controversial factor that auto insurance companies factor into the determination of a premium is the applicant’s credit history and score.

Auto insurance companies claim that studies show drivers who have lower credit scores and poor payment history are more likely to file claims, therefore, costing them money.

In comparison, drivers with better credit scores are known for being more responsible and less likely to file a claim.

This practice is legal in most states, and about 95 percent of insurance companies use credit to help determine car insurance premiums.

It is also important to remember that there are likely other factors that car insurance companies choose not to disclose to their applicants and drivers.

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What Insurance Companies Cannot Factor In

While there are many pieces of information car insurance carriers can use to determine how much you will pay for your premium, there are also several that the law forbids them from using these items:

  • Race
  • Religion
  • Occupation
  • Job history
  • Interest rates you pay
  • Child support or alimony your receive or pay
  • Other random information found online or on Facebook

How can I get better rates?

There are many steps consumers can take to get a better rate on their auto insurance premium. First, they can shop around for several different quotes before deciding on an auto insurance carrier or before renewing their policy.

Using an online price comparison tool is an easy way to shop around for rates. Drivers can do this from the convenience of their home at any time of day, without having to talk to an agent or representative.

Other ways to get better rates may include:

  • Ask for discounts such as good driver, military, student, safe driving, and occupational
  • Improve your driving record
  • Improve your credit report and score
  • Consider purchasing and driving a different vehicle
  • Consider dropping coverage you do not need or raising your deductibles.

When you have a better understanding of the information used to determine your auto insurance policy, you can be more in control of what your policy will cost you.

If you are seeking a lower premium, use our FREE online price comparison tool. Just enter your zip code to get started!