What Is a Car Insurance Premium?

Car insurance is a necessity in many states and grants you protection against costly accidents, theft and liability. However, premiums can get pricey. But you can reduce your costs by stacking discounts, comparing prices and driving safely.

Some factors that influence your premium include: credit history, gender, age, driving record and household status.

Age

Age is one of the main factors insurance companies consider when setting premiums. Younger drivers, particularly teenagers, are typically charged higher rates because they lack the driving experience older, more mature drivers have. This difference is most noticeable between the ages of 16 and 25. Once a driver hits the age of 25, their auto insurance costs tend to decrease as they gain more years of experience behind the wheel and can demonstrate a strong history of safe driving.

As a result, drivers who are in their 20s and 30s typically pay lower car insurance rates than those in their 40s. However, age is only one factor that influences a driver’s premium and other risk factors, such as their driving record and credit score also play a role in how much they pay for coverage.

A driver’s location is another key factor that influences their car insurance rate. The cost of premiums can vary widely from state to state based on minimum insurance requirements, traffic accident statistics and weather patterns. Within a state, rates can vary down to the ZIP code level. Drivers in urban areas often pay higher rates because of the increased risks of accidents, theft and vandalism compared to drivers living in rural communities.

The type of vehicle a driver drives also impacts their auto insurance rate. For example, some models of cars are more expensive to insure than others based on their safety features, likelihood of theft and repair costs. Drivers can often offset the increased expense of a more costly model by bundling their car and home insurance with the same company or qualifying for discounts such as good student, loyalty or safe driving.

Gender

Gender plays a role in car insurance rates, but the difference is smaller than it used to be. Many states have banned gender as a rating factor, and some insurers have discontinued the practice. Whether or not you pay more for your auto insurance because of your gender depends on your age, driving record, and other factors.

Men are generally considered to be higher risk drivers, so they typically pay more for their car insurance than women. This reflects the fact that men are more likely to get into an accident, as well as the higher frequency of certain types of risky driving behaviors.

The good news is that as drivers age and gain experience, the gender gap narrows. By around age 35, male and female premiums are close to the same.

Some states don’t allow gender to be a factor in car insurance rates, including California, Hawaii, Massachusetts, Michigan, Montana, North Carolina, and Pennsylvania. ValuePenguin research has found that when gender isn’t a rating factor, men and women pay roughly the same for minimum liability coverage in those states.

Of course, other factors are a big part of your car insurance rates as well, and it’s important to understand all the factors that go into determining your rate. Other major ratings factors include your annual mileage, your credit score, and the vehicles you drive. Regardless of whether your state or insurer uses your gender in their pricing, it’s important to shop around and compare car insurance quotes regularly to make sure you’re getting the best possible deal. You may be able to save money by bundling policies, maintaining a clean driving record, or even just switching providers. Ultimately, it’s your personal driving record and claim history that will have the biggest impact on your rates.

Driving Record

The driving record is another major factor insurers consider, and the impact of accidents or moving violations can last for three to five years on your premium. For example, if you get an at-fault accident on your record, your rates will likely rise substantially compared to the rates of drivers without any such incidents. The same holds true for tickets and traffic convictions.

When you fill out the information required for an insurance quote, be honest about any fender benders you’ve had in the past. The company you choose may catch this when it reviews your driving history, and the truth will usually help you lower your rate in the long run by avoiding any penalties or charges.

Car insurance quotes take a variety of factors into consideration, including the make and model of your vehicle, its total mileage, theft rates and safety features. Your age, gender and credit score may also impact your policy’s cost. Some states ban credit scores from influencing your car insurance premium, while others allow it but offer discounts to counteract its impact.

Your location can play a role in your premium, too. You’ll likely pay more for your policy if you live in an area that has higher rates of accidents, theft and vandalism. You can also save money by raising your deductibles, bundling home and auto insurance policies and taking defensive driver courses.

While your specific driving history can affect your premium, it’s not as important for all companies. A good way to find the cheapest car insurance is by comparison shopping. And while it may seem inconvenient to keep track of multiple policies, the savings you’ll gain can be worth it in the end.