What Affects Car Insurance?

By Robert Vaux

  • Overview

    Car insurance companies are a business like any other. To stay profitable they have to offset the cost of paying for hospital and repair bills caused by accidents by increasing the fees they charge for people, vehicles and situations that constitute more of a risk. Every company has its own policies -- determined by statisticians who factor in reams of data to determine the risk -- but most of them boil down to a few general factors.
  • The Driver's Record

    This is the first and most obvious factor in determining the cost of car insurance. A driver with a history of accidents, speeding tickets and other traffic violations is a much greater risk than one without (though rates tend to go down the longer you can go without a ticket or an accident). In addition, drivers who make a lot of claims on their insurance -- even if they aren't in many accidents -- tend to be assessed a higher rate.
  • The Type of Car

    Some types of cars are more attractive to thieves than others, and expensive cars often cost more to repair than cheaper ones. An insurance company will obviously charge more to cover them, though they may reduce the cost if the car contains alarms or similar features. A car's overall safety factors in as well: one equipped with air bags or other safety features means that the driver is less likely to be injured.


  • Age and Gender

    Though not always entirely fair, insurance companies tend to factor a driver's age and gender when charging for auto insurance. Older drivers are more experienced and tend to be more cautious than younger drivers; rates start dropping after you pass the age of 25. For all the sexist jokes about women drivers, females are statistically less reckless and safer than their male counterparts, and thus tend to receive lower rates.
  • Location

    Auto insurance may cost more in different states due to particular fees which insurance companies may have to factor in to their price. In addition, areas which have a heavy concentration of drivers or which are more likely to be targets of vandals charge more for auto insurance than those without. Generally speaking, charges for auto insurance in rural areas are less than urban areas.
  • Credit Score

    Again, it may not be fair or accurate, but many insurance companies consider customers with a lower credit score to be a worse risk than those with a higher score. They thus charge less for people with good credit.
  • How Much Insurance You Purchase

    Some companies adjust their rates for drivers who purchase multiple coverages, to reflect the increase or decrease in risk. Drivers can also pay less by adding deductible onto their insurance, which lets them absorb some of the losses in an accident rather than placing it all on the insurance company.
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