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10 Factors That Affect Car Insurance Rates

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  • 10 Factors That Affect Car Insurance Rates

We all need proper coverage to hit the road, regardless of how much you drive. But, that doesn’t mean each of us pays the same amount of money for our car insurance premiums.

In reality, there are several diverse factors that determine auto insurance rates. They make prices different for everyone, and it doesn’t necessarily matter how long or how far you travel. With that in mind, let’s take a look at what affects car insurance rates.

10 Factors That Affect Auto Insurance Rates

Every year your car insurance provider decides to renew your policy and determine if there should be any changes to your premiums. If you’ve ever gone online or gotten a policy breakdown in the mail, you may have discovered that the fine print can be a bit ambiguous at best. 

For help deciphering what factors impact the cost of auto insurance, here are some of the most important considerations providers take into account.

1. Driving History

Whether you’re a seasoned driver or you’re still getting comfortable behind the wheel, your driving history has a large role in determining your car insurance rates with providers. Because your auto coverage is designed to protect you (and anyone else involved) in the event of an accident, the higher the likelihood you’ll be involved in an accident, the higher your premiums will be.

If you’re deemed to be a high-risk driver due to having multiple accidents or citations on your driving record, you can expect to pay a higher rate than someone with fewer incidents. At-fault crashes particularly stand out to insurers. Speeding tickets can affect your rate, too, but insurance companies take into account the severity of the infraction.

For instance, a ticket you receive for going 30 miles per hour over the speed limit could affect your rate more than a ticket for going 10 over.

2. The City and State You Live In

Where you live matters in determining your car insurance premiums. If your city or neighborhood has a higher volume of accidents, the insurance company may see this as a sign that you’re more likely to be involved in an accident, even one that isn’t your fault. 

Busy cities with more traffic are usually on the receiving end of these premium hikes, so don’t be surprised if moving to a big city comes hand in hand with a major rate change.

Furthermore, requirements for how much car insurance you must have vary by state. Some states make you have more than others. So, you may be able to reduce your rate by opting for less coverage if you move to a state that requires less coverage.

For example, moving from North Carolina, where you must have at least $30,000 per person and $60,000 per accident, to Florida, where only $10,000 in bodily injury liability insurance per person and $20,000 of bodily injury liability per accident is required, may cause your rate to go down since you don’t have to have as much car insurance

But no matter where you live, you must maintain some form of minimum coverage. The following numbers represent state minimums in the states where Clovered is licensed to write auto insurance through its many partners:

  • Alabama
    • Bodily Injury Liability: $25,000 per person, $50,000 per accident
    • Property Damage Liability: $25,000 per accident
    • Uninsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Underinsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
  • Delaware
    • Bodily Injury Liability: $25,000 per person, $50,000 per accident
    • Property Damage Liability: $10,000 per accident
    • Uninsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Uninsured Motorist Property Damage: $10,000 per accident
    • Personal Injury Protection: $10,000 per person
  • Florida
    • Bodily Injury: $10,000 per person, $20,000 per accident
    • Property Damage: $10,000 per accident
    • Uninsured Motorist: $10,000 per person, $20,000 per accident
    • Personal Injury Protection: $10,000 per person
  • Georgia
    • Bodily Injury Liability: $25,000 per person, $50,000 per accident
    • Property Damage Liability: $25,000 per accident
    • Uninsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Uninsured Motorist Property Damage: $25,000 per accident
  • Hawaii
    • Bodily Injury Liability: $20,000 per person, $40,000 per accident
    • Property Damage Liability: $10,000 per accident
    • Uninsured Motorist Bodily Injury: $20,000 per person, $40,000 per accident
    • Personal Injury Protection: $10,000 per person
  • Illinois
    • Bodily Injury Liability: $25,000 per person, $50,000 per accident
    • Property Damage Liability: $20,000 per accident
    • Uninsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Uninsured Motorist Property Damage: $15,000 per accident
    • Underinsured Motorist Bodily Injury: $10,000 per person, $20,000 per accident
  • Indiana
    • Bodily Injury Liability: $25,000 per person, $50,000 per accident
    • Property Damage Liability: $25,000 per accident
    • Uninsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Uninsured Motorist Property Damage: $25,000 per accident
    • Underinsured Motorist Bodily Injury: $50,000 per person, $50,000 per accident
  • Maryland
    • Bodily Injury Liability: $30,000 per person, $60,000 per accident
    • Property Damage Liability: $15,000 per accident
    • Uninsured Motorist Bodily Injury: $30,000 per person, $60,000 per accident
    • Underinsured Motorist Property Damage: $15,000 per accident
    • Personal Injury Protection: $2,500 per person
  • Massachusetts
    • Bodily Injury Liability: $20,000 per person, $40,000 per accident
    • Property Damage Liability: $5,000 per accident
    • Uninsured Motorist Bodily Injury: $20,000 per person, $40,000 per accident
    • Personal Injury Protection: $8,000 per person
  • Michigan
    • Bodily Injury Liability: $20,000 per person, $40,000 per accident
    • Property Damage Liability: $10,000 per accident
    • Uninsured Motorist Bodily Injury: $20,000 per person, $40,000 per accident
    • Personal Injury Protection: $500 Deductible
  • Minnesota
    • Bodily Injury Liability: $30,000 per person, $60,000 per accident
    • Property Damage Liability: $10,000 per accident
    • Uninsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Underinsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Personal Injury Protection: $40,000 per accident
  • New Hampshire
    • Bodily Injury Liability: $25,000 per person, $50,000 per accident
    • Property Damage Liability: $25,000 per accident
    • Uninsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Underinsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Personal Injury Protection: $1,000 per person
  • New Jersey
    • Bodily Injury Liability: $15,000 per person, $30,000 per accident
    • Property Damage Liability: $5,000 per accident
    • Uninsured Motorist Bodily Injury: $15,000 per person, $30,000 per accident
    • Uninsured Motorist Property Damage: $5,000 per accident
    • Personal Injury Protection: $15,000 per accident
  • New York
    • Bodily Injury Liability: $25,000 per person, $50,000 per accident
    • Property Damage Liability: $10,000 per accident
    • Uninsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Underinsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Personal Injury Protection: $50,000 per accident
  • North Carolina
    • Bodily Injury Liability: $30,000 per person, $60,000 per accident
    • Property Damage Liability: $25,000 per accident
    • Uninsured Motorist Bodily Injury: $30,000 per person, $60,000 per accident
    • Uninsured Motorist Property Damage: $25,000 per accident
  • Pennsylvania
    • Bodily Injury Liability: $15,000 per person, $30,000 per accident
    • Property Damage Liability: $5,000 per accident
    • Uninsured Motorist Bodily Injury: $15,000 per person, $30,000 per accident
    • Underinsured Motorist Bodily Injury: $15,000 per person, $30,000 per accident
  • South Carolina
    • Bodily Injury Liability: $25,000 per person, $50,000 per accident
    • Property Damage Liability: $25,000 per accident
    • Uninsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Uninsured Motorist Property Damage: $25,000 per accident
  • Virginia
    • Bodily Injury Liability: $25,000 per person, $50,000 per accident
    • Property Damage Liability: $20,000 per accident
    • Uninsured Motorist Bodily Injury: $25,000 per person, $50,000 per accident
    • Uninsured Motorist Property Damage: $20,000 per accident

3. The Kind of Car You Drive

When it comes to the kind of car you drive, two major elements affect your car insurance rates: how expensive your car would be to replace, and how safe your car is for both you and the drivers around you. 

A more expensive vehicle, particularly a luxury or classic car, will cost more to replace and thus more to insure. The same coverage options exist for all cars, but you’ll probably want more coverage due to the higher potential repair costs. If it costs more to repair, it’ll likely cost more to insure.

Also, nice cars may have an increased chance of getting stolen, so you might be more inclined to protect them with comprehensive coverage than you would with an old car that isn’t as valuable.

As for safety, if your car comes loaded with extra safety features, like collision detection or a backup camera, your insurance provider may see this as an opportunity to provide you with a discount on your premiums.

4. How Frequently You Drive

All drivers need coverage. But if you don’t drive as often, the likelihood of filing a claim against your auto coverage is obviously lowered. Insurance providers consider these details and typically charge heavy drivers more, and lighter drivers less.

When getting a quote, insurance companies may ask you how far you drive daily. Some carriers may offer you a low mileage discount if you don’t drive very much.

5. What You Use Your Car For

Yes, we all use our vehicles for transportation, but the ‘what’ and the ‘why’ behind your commuting can have a major impact on how much your coverage costs. If you’re using your vehicle for any commercial purposes, it’s important to make sure your insurance provider understands this usage so you’re properly insured.

Using your car for business purposes may not immediately equate to a higher premium. But if you’re doing a little ride-sharing on the side, it’s important to make sure you have the right policy in place.

6. The Coverage You Enroll In

As with every type of insurance, the coverage and deductible levels you choose to enroll in are major factors that determine auto insurance rates. Higher levels of coverage Whether you have full coverage or liability only will significantly impact your premiums. Similarly, opting for a lower deductible (so lower out-of-pocket expenses in the event of an accident) will also equal higher premium rates.

For example, if you have a $250 deductible and you get into a car accident that causes $1,000 worth of damage, your insurer will pay the remaining $750 after you file a claim. But, if you had a $500 deductible in this same scenario, you would pay the $500 toward your claim, and the insurance company would only pay $500. 

If you have a higher deductible, then your auto insurance carrier doesn’t have to pay as much if you file a claim, so they will charge a lower rate.

If you lease or finance your vehicle, you’ll likely pay more for premiums because your lender will require you to enroll in full coverage. Even if you own your vehicle outright, you may want to invest in comprehensive and collision coverage to ensure your vehicle is protected during wrecks or from damage caused by a natural disaster, such as a hailstorm or flood.

There is a certain point in your vehicle’s valuation when dropping comprehensive and collision coverage makes sense. But if you do, just know you won’t be protected against damage from external factors like hurricanes, earthquakes, lightning strikes and tornadoes.

Similarly, you’ll assuredly pay extra for additional add-ons in coverage, like rental car protection, roadside assistance and any other bells and whistles that may make your life easier.

7. Your Age

Unfortunately, if you have no driving history to speak of, you might get the short end of the stick as far as rates are concerned. Insurance providers tend to charge a higher rate to young or new drivers until you have more driving history to show how safe you are.

Younger drivers almost always pay more than older drivers for car insurance. Sixteen-year-olds on average pay twice as much for coverage than 20-year-olds, for example. Younger drivers are simply a higher risk since they have less experience behind the wheel. They tend to pay more for car insurance until the mid-20s.

Then, auto insurance rates continue to decrease as you get into your middle ages until they finally start to creep up again when you become elderly. You can expect to pay more for auto insurance premiums when you get around age 65. 

Rates increase for older people because, not only do you have a higher chance of getting in an accident when you’re elderly, but you have a higher chance of sustaining serious injuries in one, too.

8. Your Credit History

When insurance companies determine rates, they’re calculating risk. The higher risk they’re taking on, meaning the greater likelihood they’ll have to pay out a claim, the higher premium they’ll charge. This is how your behavior on the road affects your rate.

But what you do off the road can, too. If you’ve shown a spotty history of paying your bills or debts, you may pay more for car insurance. Not every state allows it, but some providers use your credit history as an indicator of your likelihood to pay your insurance payments on time and file a claim.

It gets factored into what’s called an auto insurance score, which, similar to a credit score, gives you a rating of your history as a borrower and payer. If you’ve got good credit, you’ve probably got a good insurance score — and a good comprehensive loss underwriting exchange report on file, too. If you have bad credit, you may pay more for car insurance because the insurer believes you pose a bigger risk of not paying on time.

9. Home Ownership

When getting a quote, many insurance companies will ask you if you own a home. In addition to it showing some financial stability that insurers like to see, owning a house can also give you the chance to bundle your home insurance and auto insurance policies.

Bundling policies is the practice of having one insurance company handle more than one of your plans, like your home insurance and car insurance. Companies typically reward this loyalty by decreasing your premiums a certain percentage on one, if not both, of the policies. It varies by insurer and state, but a bundling discount can save you up to 25%.

10. The Insurer You Choose

Speaking of insurers, the company you ultimately decide to go with has one of the greatest influences on how much you pay. Every company has different formulas for calculating rates using the factors we’ve just discussed. While you’re unlikely to find out exactly how they incorporate all the different ones, you can see the effects they have on the policy you want by getting quotes from multiple companies. When getting car insurance, you should always shop around.

Different insurers offer different discounts, have different ways of paying out, and offer different customer service. Some companies may specialize in insuring older cars or high-risk drivers. One company may be better equipped to handle claims in your state than another.

The best way to properly analyze which carrier has just what you need takes research and comparing quotes. At Clovered, we aim to help you with this. We try to break down insurance to make it as easy as we can, from articles that explain industry terms to our intuitive quoting platform that can help you get a quote quickly and put you in touch with our team of experts.

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The editorial content on Clovered’s website is meant to be informational material and should not be considered legal advice.