Home » Insurance » Auto Insurance » Auto Insurance Premium

Auto Insurance Premium: 5 Surprising Factors That Affect Your Premium

Updated: July 30, 2018

When looking at the auto insurance premium in an insurance quote, customers may begin to wonder why they are being quoted certain prices.

The truth is that insurance companies have a system in place that allows them to set certain premium rates.

Insurance companies want to make a profit, which means they factor in the risk of an individual customer when creating the auto insurance premium.

Individuals who fall into higher risk categories will get quoted higher premiums, while the opposite is true for lower risk category customers.

Here is a look at some factors that determine your auto insurance premium.

Age and Gender

There is no doubt that a person’s gender and age plays a huge role in the auto insurance premium they are quoted by different companies.

People who are aged 30-64 statistically get offered the lowest car insurance premiums.

The highest risk group in this category is young men aged 16-29. These individuals are statistically proven to cause the most traffic accidents every year. For this reason, insurance companies will offer quotes with higher premiums to young men.

People who are aged 30-64 statistically get offered the lowest car insurance premiums. This is because they cause far fewer accidents than younger and older people. This is why you will see your auto insurance premiums decrease as you go from being a teenager to an adult.

In terms of individuals aged 65-older, women are actually offered higher auto insurance premium rates than men, because statistics show that they cause slightly more accidents. But the differences in premium rates between these two groups is not that significant.

This is one of the factors that you have no control over, because you cannot change your age or gender! However, young drivers can get good grades in high school and/or college to get premium discounts.

Where you Live

The place where a person lives will definitely determine the auto insurance premium rates they are offered. As a general rule, people who live in densely populated areas will have higher insurance premiums. This is because there are more accidents in densely populated neighborhoods on an annual basis.

Another reason that urban dwellers pay more for insurance is because of the number of underinsured individuals who still drive in those areas.

If someone lives in a sparely populated neighborhood or in a rural area, their insurance premium rates are probably much lower. The insurance company determines that their circumstances make them a lower risk for seeking claims.

Another reason that urban dwellers pay more for insurance is because of the number of underinsured individuals who still drive in those areas.

The insurance company must account for the fact that these urban dwellers are likelier to get into an accident with someone who does not have any auto insurance.

In terms of specific cities, statistics show that Philadelphia and Denver are at the top of the list in terms of expensive auto insurance premium rates for their citizens.

Driving Record

While factors such as age, gender and location are very important in determining premium rates, a person’s individual history is also factored into the equation.

Aside from avoiding accidents, people with no traffic tickets on their record will also get offered discounts on car insurance premiums.

Individuals who get into a lot of accidents are going to face a much higher auto insurance premium rate whenever they look to renew their policy, or get a new one. In contrast, someone with no accidents on regular will get much lower premium offers.

Aside from avoiding accidents, people with no traffic tickets on their record will also get offered discounts on car insurance premiums.

One of the biggest red flags on a person’s driving record, in terms of insurance, is a DUI or DWI conviction. Insurance companies take these convictions very seriously. In fact, many insurance companies have a separate category of much higher auto insurance premium rates for individuals who have a DUI or DWI on their record.

If you want to consistently pay less for auto insurance throughout your life, it is important to drive sensibly and safely. Also make sure that you never drive after you have been drinking.

Marital Status and Occupation

Interestingly, being single or married can have an impact on the auto insurance premium rates you see in the quote given by various companies. These companies believe that single individuals are more likely to cause accidents than married individuals.

Jobs such as delivering pizza or driving for Uber mean an increased possibility of getting into an accident, which leads to higher premium quotes.

Getting married has a hugely positive impact on the auto insurance premium you will pay in the next few years, and this is especially true for men.

For example, a married man who has no accidents on his driving record will theoretically pay half of what a single man with accidents on his record pays per year in auto insurance premiums.

The job a person performs every day also impacts their premiums. Jobs such as delivering pizza or driving for Uber mean an increased possibility of getting into an accident, which leads to higher premium quotes. In contrast, someone working as an accountant will probably get offered much lower rates.

The importance or credibility of a person’s job also impacts their premium rates. For example, police officers and insurance employees are offered lower premiums on average than fast food workers or bartenders.

Vehicle Make and Model

Aside from a person’s age, gender, location and driving history, the car they are driving also impacts the insurance premiums they are quoted by companies.

Bigger cars come with higher premiums because they will cause a lot more damage in a car accident, which means higher theoretical payouts from the insurance company.

What lowers insurance premiums? Driving a smaller, older vehicle that has a high safety rating is the best way to drastically cut down on your insurance premiums. In contrast, newer, bigger cars that do not have the best safety ratings result in very high insurance premiums.

Bigger cars come with higher premiums because they will cause a lot more damage in a car accident, which means higher theoretical payouts from the insurance company.

Newer cars are more expensive to insure because they theoretically cost more to fix. With older vehicles, people are more likely to get cheap repairs done themselves because their car has a fairly low value.

Larger and more expensive vehicles are also more likely to fall victim to vandals or thieves. This means that anyone with a large SUV or a sports car is going to face much higher comprehensive auto insurance premiums.