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What Factors Have The Greatest Impact On Car Insurance Rates?

Factors affecting car insurance rates

No matter where one lives, shopping for car insurance can result in multiple quotes varying in price – even when receiving quotes on the same coverage. Car insurance  is regulated at the state level, thus coverage requirements and costs will vary depending on a person’s residence – as well as additional factors considered when developing a policy. Here’s a look into the biggest factors affecting the price a driver will pay for car insurance rates. 

Demographics — Male or Female

Currently, only six states do not allow gender to be a factor in insurance premium pricing. Those include California, Hawaii, Massachusetts, Pennsylvania, North Carolina, and Montana. In all other states, women will typically pay more for coverage. 

Business Insider investigated quotes provided by State Farm and Allstate on basic coverage for people with identical profiles, apart from their gender. In Austin, Texas, males were quoted at $1,069 per year, while females were quoted at 5% more with an average annual cost of $1,124. This result was similar in other major cities across the country including Seattle, Miami, and Chicago. 


Typically, new drivers will pay more for the same coverage based on lack of experience. According to California Department of Insurance, new drivers are up to 73% more expensive than a driver with 16 years of driving experience. These rates begin to even out as new drivers approach the age of 21. 

Driver Profile

An insurance quote takes into consideration multiple factors of a driver’s history and information to determine their premium. For example, Insurance.com reports that rates jump 30% following an accident. The same source states that drivers with a DUI on their record will pay on average of 63% more than those without the infraction. 

Additionally, poor credit may be costing you more in insurance premiums. With the exception of California, Hawaii, and Massachusetts, states consider credit scores to be one of the biggest factors in varying rates from person to person. According to Consumer Reports, car insurers began using credit scores in the 1990s to test their theory that credit scores can predict risk of claim filing. By 2006, most major insurers were using this as a predictive factor, but most consumers do not realize this is a factor in the cost of their premiums. Depending on the state you live in, single drivers with only good credit scores may pay anywhere from $68-$526 per year more on average than their counterparts with the highest credit scores. 

State-to-State Coverage

As we previously noted, car insurance is regulated at the state level, and some states – like New Hampshire – don’t require it at all. Meanwhile, in Michigan, a no-fault law requiring unlimited coverage for personal injury makes the statewide premiums some of the highest in the nation. 

Additionally, those who live in urban areas will typically pay more for insurance. According to data from insure.com, Idaho, Iowa, Wisconsin, and Maine have the cheapest premiums in the nation due to the largely rural areas.

Additional Factors

The year and model of the car driven will also impact rates. The newer the car, the more expensive it will be to replace. Therefore, drivers will be required to pa higher premiums to insure it. Companies will also look at the number of miles driven per year, with the rationale that the less miles driven per year will decrease the likelihood of an accident.

According to ValuePenguin, having a lapse in coverage for 30 days or more can lead to a 29% increase in premiums. And, The California Department of Insurance reports that married drivers may pay up to 42% more than their single counterparts. 

Finally, the type of coverage will play a role in determination of premiums. Every state has its own minimum requirements. As coverage increases, so do premium rates, and some states are more expensive than others. According to Nerdwallet, adding comprehensive coverage that protects your vehicle in the event of natural disasters, or collision coverage that aids in the costs associated with repairing damage to your car can raise your premium by $1,000 or more annually. 

Changes Over Time

According to the National Association of Insurance Commissioners, insurance premiums have increased over time from an average of $798 annually in 2007 to an average of $935 annually in 2016. These increases consider all of the above factors along with inflation. But the biggest determination in getting your best rate is to shop around, as all insurance companies have a slightly different formula for figuring out your potential premiums.