Five factors that affect your auto insurance payment are how often you pay your premium, your vehicle, your driving history, your credit history and your state's coverage requirements. Insurance companies use most of these factors to determine how likely you are to file a claim and thus how risky you are to insure.
Keep in mind that calculating insurance rates can be complex. Insurance companies use more than five factors when setting premiums, and the criteria used can vary by state. For example, your ZIP code, marital status, gender, and annual mileage can also be used to determine your insurance costs.
5 Factors That Affect Your Auto Insurance Payment
- Payment frequency: A monthly premium payment will obviously be a lower amount than a payment for a full year or six months. However, if you pay monthly, your payments will likely add up to a higher total premium because insurance companies charge more for installments. Your insurer may also offer a discount for paying your premium in full instead of monthly.
- Vehicle type: The type of car you drive can make your insurance go up or down, depending on the make, model, year, if it has certain safety features, or if it is heavily targeted for theft.
- Driving history: Having a clean driving record insures better prices for your insurance premium, but if you have accidents or traffic violations, like tickets for speeding and red light infractions, your auto insurance payment will be more expensive.
- Credit history: In most states, insurance companies use an auto insurance score when calculating premiums. Your credit history is used to generate your auto insurance score, so good credit results in a high auto insurance score and a lower premium, while the reverse is true if you have poor credit.
- State requirements: While liability insurance is required by law in most states, some states require additional types of coverage – like personal injury protection or uninsured motorist coverage – or higher coverage limits than other states, which can increase the cost of your premium.
Other Factors That Affect Your Auto Insurance Payment
- Age: Younger drivers are typically riskier to insure due to their lack of experience and are statistically more likely to get into car accidents, so their insurance rates are higher compared to middle-aged drivers.
- Location: Information about crime, traffic, and accidents in your ZIP code is used when determining how much you’ll pay for car insurance. Typically, drivers in urban areas pay more than rural drivers due to higher rates of crime, traffic, and accidents.
- Gender: In most states, male drivers under 25 years old often pay more for insurance than their female counterparts. The opposite tends to be true for middle-aged drivers.
- Marital Status: Insurance companies typically charge married drivers lower car insurance rates because they are statistically less likely to get into car accidents than single drivers.
- Annual mileage: The more you drive, the more likely you are to get into a car accident and need to file a claim. Since Americans drive around 14,000 miles per year on average, having a higher annual mileage can result in higher premiums.
To learn more, check out WalletHub’s guide on factors that affect car insurance rates.
This answer was first published on 02/14/23 and it was last updated on 02/18/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
