What Factors Impact Your Auto Insurance Policy Cost?

February 16, 2017

Whether you’re just getting your first insurance policy or shopping for a new one, it always helps to have basic knowledge about what you are purchasing.

One of the most commonly asked questions about car or auto insurance is how much it costs. But what most of us forget to ask is what factors impact such costs?

This article offers answers.

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The average cost of a monthly auto insurance premium in the US can range from $80 to $170, depending on which state you live in. It can amount to over $2,000 a year for some states. However, the location is not the only determining factor that decides how much you will be paying each month or every year.

Here are the most common (but not universal) criteria used by insurance companies in determining your insurance policy cost.

Your driving record

If you’re a new driver or have never had an insurance before, you are most likely going to pay higher. The same can be said if you had multiple moving violations in the past, had been on accidents, had your previous policy canceled, or generally just have a bad driving record.

Your age

Generally, teen drivers and adults aged 25 and below pay higher in their auto insurance premiums compared to more mature car owners. This is because insurers take into account the driver’s driving experience and more mature adults are seen as lower risks.

Your gender

Despite the stereotype that women can’t drive, women are statistically less prone to get in trouble with cars. They have fewer accident records, are less likely to drive under the influence, and get involved in less serious accidents than male drivers. So if you’re a female, you have more probability of paying less for your auto insurance.

The type of car that you drive

Of course, more expensive cars would have more expensive premiums since insurance companies are taking a big risk when replacing them or paying for damage made to them. They have higher theft potential, cost a lot to repair, and have expensive parts. Not only that. They also look at how much damage the vehicle can possibly inflict to another.

Thus, insurers always factor in the kind of car you drive. If your vehicle has high-quality safety equipment, you may be able to ask for a discount.

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Frequency of car usage

You will likely be paying more if you use your car frequently. Mileage affects premium cost. If you drive to work or use it for long distance commutes, your premium will be higher.

The applicant’s credit

Your credit score is not only used by lenders, they are also utilized by insurers to gauge your dependability as a policyholder.

The type and amount of your auto insurance coverage

Coverage limits, the amount you are willing to pay when filing a claim (deductible), and the types as well as the amounts of other policy options that you may qualify for all factor in to determine your premium payment.


If you live in an area with high crime rates, you might need to pay a higher policy cost to compensate for the risk. Whether you have a garage or only park on the street is also a factor that insurers take note.

Different states also have varying costs of medical care, cost of getting involved in litigation, or have more natural disaster risks. Understandably, location is a huge factor that insurers take seriously when doing the math.

Having security or features that mitigate theft can lower your premium as they lessen the probability of theft. This is a feature worth considering if you live in high crime rate cities or districts.

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