9 Factors That Affect Car Insurance Rates in 2021


You may not have full access to how car insurers determine your rates. However, the process doesn’t have to be mysterious. We break down the nine most important things that affect your car insurance rates.

Factors That Affect Your Car Insurance Rates

  1. Level of Insurance Coverage
  2. Deductible Amount
  3. Previous Car Insurance Claims
  4. Demographics (including Marital Status)
  5. Credit History
  6. Driving History
  7. Annual Mileage
  8. Car Make and Model
  9. ZIP Code

1. Level of Insurance Coverage

When considering your auto insurance costs, the level of insurance you choose is one of the most important factors to how much you’ll pay. This is also something that drivers can control. 

Drivers can choose policies that cover liability, collision, uninsured motorists, or comprehensive coverage. Choosing a higher level of coverage means that your insurance costs will be higher. Conversely, you can lower your costs by reducing your coverage, but this can mean you’ll assume a higher level of risk. 

RELATED STORIES: 5 Common Types of Car Insurance Coverage

According to Savvy, your monthly costs with basic liability coverage can be as low as $98.16 on average. However, rates vary from company to company, as you can see from the table below. Some companies, like MetLife, may charge as much as $269.42 for a monthly policy. 

Average Monthly Cost for Liability Coverage
Issuer Value
SafeAuto $98.16 Least Expensive
Wawanesa $130.59
21st Century $142.12
State Farm $143.84
The Hartford $145.50
USAA $194.43 Most Expensive
Safeco $196.24
Farmers $204.83
Travelers $211.03
MetLife $269.42
AVERAGE $172.61

Source: Savvy

Overall, you can expect to pay $172.61 on average for liability coverage. According to Savvy research, the average cost of all policies other than liability coverage is $178.48. 

Average Monthly Cost for All Policies
Issuer Value
Safe Auto $87.02 Least Expensive
Automobile Club of Southern California $114.58
State Farm $126.28
Dairyland $143.61
The General $144.34
AAA NorCal $210.99 Most Expensive
Bristol West Insurance $211.14
Farmers $213.03
MetLife $223.15
Bristol West $277.27
AVERAGE $178.48

Source: Savvy

Keep in mind that there are state requirements that may determine the types of coverage you’re required to have. 

2. Amount of Your Deductible

Car insurance rates are also affected by your decision to choose a high-deductible policy or a low-deductible policy. Policies with higher deductibles will have lower monthly costs. Conversely, low-deductible policies will have higher monthly rates.

In some cases, it’s a smarter move to pay more for a low-deductible policy. Learn how to choose your car insurance deductible to identify the sweet spot between cost versus risk.

According to The Zebra, the most common deductible levels are $500 and $1,000. If you chose to go with the lower of the two, you can expect your average six-month premium to be $744 on average. However, if you go with a $1,000 deductible, The Zebra research says you can expect to pay $678 on average for the same policy.

3. Number of Car Insurance Claims

From the perspective of a car insurer, drivers who previously filed a car insurance claim would be more likely to file a claim in the future. 

On average, drivers with a previous claim can see their rates increase by 42%. Changing providers won’t help you avoid this rate hike because insurers search the industry-wide Claim Loss Underwriting Exchange (CLUE) to identify past claims. 

Many companies only look for claims made in the past three years. However, some look back five years, and others can look at 10 years worth of your driving history. If you do have a previous car insurance claim, compare insurance rates and other companies to see how previous claims affect your premium costs. 

4. Demographics

Your demographics will also affect your car insurance rates. Insurance companies use statistical modeling to identify which characteristics are more likely to lead to bigger claims, and they set your rates accordingly. 

Age

Teen drivers pay the highest car insurance rates. The impact of age is significant, with teen drivers paying at least $400 more on average than other age groups. The lowest average insurance rates are for drivers between 25 and 34 and rates start to increase again for older drivers over age 50.  

Average Annualized
Age Group Average Value
18 to 24 $2,682.69
25 to 34 $2,136.87
35 to 49 $2,224.82
50 to 69 $2,252.31
70 or Above $2,282.10

Source: Savvy

Gender

The impact of gender on car insurance is significant. Women can expect to pay nearly $1,000 more for car insurance a year than men overall. Take a look at the table below for more information.  

Average Annualized
Gender Average Value
Male $2,372.60
Female $3,397.26

Source: Savvy

According to The Zebra, the following states don’t use gender when calculating premiums.

  • California
  • Hawaii
  • Massachusetts
  • Montana
  • North Carolina
  • Pennsylvania

Marital Status

Even marital status can impact automobile insurance rates. According to The Zebra, insurers consider married drivers as more financially stable and safer on the road. As a result, a married driver pays on average about $100 less per year for car insurance than a single, widowed, or divorced driver, the Zebra says.  

Average Six-Month Policy
Marital status Average Value
Married $1,388
Single $1,484

Source: The Zebra

5. Credit History

Data shows that drivers with poor credit histories pay more for auto insurance. A study by The Zebra analyzed 73 million car insurance rates and found that people with very poor credit rankings pay 115% more than those with exceptional credit, or more than $1,500 a year. 

In addition to a financial credit score, car insurers may also consider a similar metric called a credit-based insurance score. While a typical credit score predicts the likelihood that you’ll pay your bills on time, a credit-based insurance score predicts the likelihood that you’ll file an insurance claim of a higher amount than what you’ll pay in insurance premiums. 

Some states have moved to limit or prevent car insurers from using credit history to determine insurance rates.

States Where Credit History Does Not Get Used for Quotes:

  • California
  • Hawaii
  • Maryland
  • Massachusetts
  • Michigan
  • Utah

6. Driving History

A clean driving record helps you get the lowest rates, and many auto insurance companies provide a safe-driver discount that could reduce the cost of your policy by 40%.

Insurers will check motor vehicle records to look for any red flags such as high-risk traffic violations. Patterns of behavior such as repeated speeding tickets can cause rates to double. The increase can be even worse for a DUI or reckless driving charge.

Defensive driving classes can also help mitigate any rate hikes related to previous traffic tickets or driving violations.

7. Annual Mileage

Car insurers will consider your annual mileage and commuting distance when setting your rates. Low-mileage drivers can get lower rates because they’re less likely to make a claim. 

As you can see from the table below, the more you drive, the more you can expect to pay for car insurance. For example, drivers with State Farm automobile insurance who log less than 3,000 miles a year can expect to pay as little as $1,066.54. On the other hand, if you cover between 15,000 and 20,000 miles a year, you’ll pay $5,124.28 a year if you live in places like Alaska, Arizona, California, Montana, Nevada, Utah, or Wyoming and choose a AAA Norcal policy. 

Mileage Buckets Average Annual Rate Per Vehicle Issuer with the Lowest Rate Lowest Rate Issuer with the Highest Rate Highest rate
0 to 2,999 $2,033.35 State Farm $1,066.54 Nationwide $3,163.08
3,000 to 5,999 $2,029.88 The Auto Club of Southern California $674.00 AAA Norcal $4,549.15
6,000 to 9,999 $2,073.86 Erie $1,320.11 AAA Norcal $3,448.83
10,000 to 11,999 $2,135.19 State Farm $1,602.35 Bristol West $3,437.38
12,000 to 14,999 $2,197.89 Esurance $1,528.50 Bristol West $5,624.00
15,000 to 19,999 $2,620.13 The General $1,756.35 AAA Norcal $5,124.28
20,000 or Above $2,101.60 Allstate $1,619.20 Farmers $2,969.43

Source: Savvy

The Federal Highway Administration reports that the average driver clocks about 14,263 miles per year, in its latest study in 2019. You can check your state’s average annual mileage and then compare rates from different companies.

It can help you find the best plan for your annual mileage. For comparison: a 50-mile round trip commute to work adds up to 13,000 miles per year, likely indicating a high-mileage driver after adding in other driving miles. 

8. Car Make and Model

Car insurance companies use a car’s make and model information to determine the cost of your car. This helps them know how much money is on the line if the car is totaled and they have to replace it.

Drivers will have higher rates for flashy or expensive vehicles such as sports cars, luxury vehicles, or electric cars. In one scenario, an 18% increase in list price led to a 6% increase in car insurance premium rates. Insurance could also be higher on cars that are most often the target of crime. 

Find out how much your car is worth to learn how your insurer factors in the car you drive. 

9. ZIP Code

Car insurance pricing models can be very granular. Insurers use your ZIP code to look at the crime rates of where you park your car at night. They’ll also use location information to look at environmental threats such as floods or wildfires. Low-crime or rural areas tend to mean lower car insurance rates than urban or other high-risk neighborhoods.

If you’re looking to lower your car insurance premiums, start with deductibles and discounts. Then, you can try other strategies such as telematics, which allows an insurer to track your driving habits and if they’re good, you’ll earn a discount.

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