Two drivers can own similar cars and still receive very different insurance prices. That's because car insurance rates depend on numerous pieces of information rather than the vehicle alone.
Insurers generally use underwriting to evaluate risk and rating to determine the price charged for a policy. According to the National Association of Insurance Commissioners (NAIC), common rating factors can include location, age, driving experience, driving history, claims history, vehicle type, vehicle use, mileage, selected coverage, and deductibles. Credit information may also be used where state law permits it.
State insurance laws can restrict which factors insurers are permitted to use, so the exact calculation can differ by state and company. Understanding the information behind auto insurance premiums can still help you review a renewal, compare insurers, and spot policy details that deserve a second look.
1. Your Driving History Can Affect Your Rate
Your driving record is one of the common factors insurers may review when determining a rate. Traffic violations, crashes, and other driving-history information can influence how an insurer evaluates risk.
The effect of an incident depends on the insurer, state rules, the type of incident, and other circumstances. An accident or ticket therefore does not produce the same rate change for every driver.
When reviewing a renewal or applying for a policy, make sure the driving information used by the insurer is accurate. If an insurer identifies an incident you do not recognize, ask where the information came from and how you can review it.
2. Your Location Can Influence Car Insurance Rates
Where a vehicle is kept can affect its insurance price.
The NAIC identifies location as one of the main rating factors insurers may use. Insurers can evaluate claims experience and expected losses associated with geographic territories when developing rates, subject to applicable state laws.
A move can therefore affect your insurance cost even if your vehicle and driving habits stay largely the same.
Keep the garaging address on your policy accurate. An incorrect address could affect the information used to rate your policy and could create issues later.
3. The Vehicle You Drive Matters
Insurance costs can differ significantly from one vehicle to another.
Vehicle type is among the rating factors identified by the NAIC. Insurers may evaluate expected claims and losses associated with different vehicles when setting prices.
For that reason, the purchase price of a car doesn't tell you exactly how expensive it will be to insure.
If you're planning to buy another vehicle, getting car insurance quotes for the models you're comparing can help you estimate the insurance expense before making a purchase. Use consistent drivers, coverage limits, and deductibles for each quote so the comparison is useful.
4. Your Coverage Choices Affect What You Pay
The protection you select directly affects the price of your policy.
Liability limits, collision coverage, comprehensive coverage, and other selections can change the premium. Increasing protection can increase the amount the insurer could potentially pay after a covered loss, while removing optional protection may reduce the premium.
This is why comparing prices without comparing auto insurance coverage can be misleading.
For instance, Policy A could cost less than Policy B because Policy A provides lower limits or excludes protection included under Policy B.
When comparing policies, check:
- Coverage types
- Liability limits
- Collision and comprehensive coverage
- Deductibles
- Listed drivers and vehicles
- Optional protections
- Exclusions and limitations
A cheaper policy isn't automatically the better value if it provides substantially different protection.
5. Your Deductible Can Change Your Premium
A deductible is the amount you agree to pay toward a covered loss before the applicable insurance payment is calculated under the policy.
For collision coverage, the NAIC notes that choosing a higher deductible can lower the premium. The tradeoff is increased out-of-pocket responsibility following a covered claim.
Suppose you're comparing a $500 deductible with a $1,000 deductible. Choosing $1,000 means accepting an additional $500 in potential out-of-pocket expense after a covered loss subject to that deductible.
Don't evaluate the premium reduction alone. Check how much you'd need to pay after a claim and decide if that amount fits your finances.
6. Claims History May Be Part of the Calculation
Previous insurance claims can affect underwriting and pricing.
The NAIC lists claims history among the main factors that can influence auto insurance pricing. Insurers may obtain claims information from specialty consumer reporting companies when evaluating applicants.
One example is LexisNexis C.L.U.E., a claims information exchange. According to the Consumer Financial Protection Bureau, C.L.U.E. collects and reports up to seven years of auto insurance claims and provides that information for insurance pricing and underwriting.
Consumers can request a free C.L.U.E. report once every 12 months. If information is inaccurate or incomplete, consumers have rights under the Fair Credit Reporting Act to dispute it with the reporting company and the business that supplied the information.
Checking your report can be particularly useful if a quote seems unexpectedly expensive and you suspect incorrect claims information.
7. Credit Information May Affect Rates in Some States
In states that permit the practice, insurers may use a credit-based insurance score as part of underwriting or rating.
This type of score differs from a standard lending credit score. It uses information from a consumer's credit history to estimate insurance risk. The NAIC states that insurers primarily use these scores for underwriting and rating where their use is legally permitted.
State restrictions matter. The ability to use credit information and the rules governing its use vary across the country.
If credit information is permitted in your state, review your credit reports periodically and dispute inaccurate information through the appropriate consumer reporting company.
You can also contact your state insurance department to learn which rating practices are allowed where you live.
8. Mileage and Vehicle Use Can Influence Pricing
How much and how you use your vehicle may affect your rate.
The NAIC identifies vehicle use and miles driven as common rating factors. Driving patterns can change over time, so the mileage or vehicle-use information on an older policy may no longer reflect your current situation.
For example, a change in commute or work arrangement could alter your annual mileage.
Review the mileage and vehicle-use information your insurer has at renewal. If your driving habits have changed significantly, ask the insurer if updating that information affects your policy.
9. Telematics Can Add Driving Behavior to the Equation
Some insurers provide usage-based insurance programs that collect driving data through a smartphone, connected vehicle system, or another telematics device.
Depending on the program, collected information can include:
- Miles driven
- Time of day
- Rapid acceleration
- Hard braking
- Hard cornering
- Location
- Phone use
The specific data collected varies by program. State rules can also affect how insurers are allowed to use the information.
Don't assume signing up automatically guarantees a lower rate.
Before enrolling, read the current program terms and check what information is collected, how it can affect your premium, how long data is collected, and what happens if you stop participating.
Privacy deserves attention as well because some programs can collect location and behavioral data.
10. Discounts Can Affect the Final Price
Insurers may provide car insurance discounts for drivers or households that meet specific criteria.
The NAIC lists examples that can include multiple vehicles, driver education, good-student eligibility, safety equipment, anti-theft equipment, low mileage, qualifying driving history, and combining auto and home insurance with the same carrier. Availability varies by insurer and state.
A discount that exists at one insurer may not exist at another. Eligibility requirements can differ too.
At renewal, ask for a current list of available discounts and compare it with those already applied to your policy. Changes in your household, driving habits, vehicle, or other insurance policies may affect eligibility.
Why Car Insurance Rates Can Change at Renewal
A rate increase doesn't necessarily mean you caused it.
Insurance companies price policies partly around expected claim costs and risk. The NAIC notes that premiums can be affected by personal factors as well as broader risk conditions associated with where a policyholder lives.
At the individual level, changes involving your driving history, claims, vehicle, mileage, address, coverage selections, deductible, or household drivers could affect the renewal price.
Insurers may also revise their underlying rates, subject to state insurance laws and regulatory requirements.
If your renewal price changes significantly, ask your insurer what factors contributed to the change. You can then determine which details are specific to you and which result from broader pricing changes.
How to Compare Car Insurance Rates Fairly
Shopping around can provide useful information only when you're comparing similar policies.
A $900 policy and a $1,200 policy aren't directly comparable if the first carries lower liability limits, a substantially higher deductible, or fewer types of protection.
Use the same information for each quote whenever possible:
| Item to Compare | What to Keep Consistent |
|---|---|
| Drivers | Same household drivers |
| Vehicles | Same vehicles and vehicle information |
| Liability | Same coverage limits |
| Collision | Same selection and deductible |
| Comprehensive | Same selection and deductible |
| Vehicle use | Same mileage and usage |
| Optional protection | Same selected options where available |
After aligning the policies, compare the premiums, insurer terms, exclusions, available discounts, and service considerations.
Financed Cars May Have Additional Insurance Requirements
Drivers financing a vehicle need to account for the loan agreement as well as state insurance requirements.
The Consumer Financial Protection Bureau states that vehicle lenders require insurance protecting the financed vehicle. If required insurance isn't maintained or the policy lapses, the loan contract may permit the lender to obtain force-placed insurance.
Force-placed coverage generally protects the lender's financial interest rather than providing the same protection a driver would select independently. The CFPB also warns that it is usually considerably costlier than insurance purchased directly by the consumer.
Read your loan agreement to confirm its insurance requirements and keep proof of qualifying coverage available.
Which Car Insurance Factors Can You Control?
Some pricing factors are easier to change than others.
You may have some control over:
- Coverage selections
- Deductible amounts
- Annual mileage
- Eligible discounts
- Vehicle choice
- Participation in optional telematics programs
- Which insurer you select
Other factors, such as past driving incidents or claims, can't simply be erased. Location and state insurance rules may affect pricing as well.
The goal isn't to change every rating factor. Focus on keeping your information accurate and making policy choices that fit your finances and protection needs.
Questions About Car Insurance Rates
What determines car insurance rates?
Insurers can use factors such as driving history, claims history, location, vehicle type, vehicle use, mileage, selected coverage, and deductibles when calculating premiums. Credit information and certain personal characteristics may also be used where state law permits them. Each insurer has its own rating approach within applicable regulatory rules.
Can a higher deductible lower car insurance rates?
It can. Increasing a collision or comprehensive deductible may reduce the premium for that coverage, although you accept greater out-of-pocket responsibility after a covered loss.
Does your credit affect car insurance rates?
It may in states where insurers are permitted to use credit information. A credit-based insurance score can be one factor in underwriting or rating. State laws govern or restrict its use.
Can driving less reduce your insurance rate?
Mileage is one factor insurers may use when calculating premiums, so a change in annual mileage can affect pricing. The effect depends on the insurer's rating method and applicable state rules.
Should you choose the cheapest car insurance rate?
Price is one part of the decision. Compare equivalent coverage limits, deductibles, vehicles, drivers, and policy features before deciding. A lower premium may reflect less protection or greater out-of-pocket responsibility.
What to Check Before Your Next Renewal
When your next renewal notice arrives, compare the new premium with your current policy information instead of focusing on the price alone.
Check that your address, vehicle information, drivers, mileage, coverage limits, and deductibles are accurate. Review your claims information if something appears wrong, ask about available discounts, and request comparable quotes from other insurers if you want to test the market.
Car insurance rates reflect numerous factors, and not every factor is within your control. Knowing what insurers may evaluate gives you a practical way to check your policy, correct inaccurate information, and compare coverage without sacrificing protection solely to reduce the premium.
