Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific car insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life, from budgets to coverage levels. She also specializes in automa...

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Reviewed by Melanie Musson
Published Insurance Expert

UPDATED: Mar 13, 2020

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Car insurance rates vary from one driver to the next; no two drivers will pay exactly the same premiums. Premiums vary so much because they are dependent on the risk a driver poses to the car insurance company. People with a high likelihood of causing a car accident will pay more for insurance than drivers who are unlikely to be involved. This is because car insurance companies want to balance the cost of claims against premiums.

Rate determination is a complex process that’s determined largely by computers. When you obtain a quote, your answers to the questions on the application will be run through an algorithm that will determine the approximate cost of your insurance. While there are dozens of factors involved in car insurance premiums, here are some of the most common:

Your driving history

This is the single most important element of your auto insurance premiums. If you have ever been involved in a car accident, your rates will be affected. Similarly, other driving factors will influence your rates. Traffic violations, DUIs and speeding tickets will all lead to rate increases. Each incident will cause a point to be added against your driving history; points can take up to seven years to drop off of your record, so take care not to let them build up.

Your age and marital status

Young people, especially young men, are statistically more likely to be involved in auto accidents. Married couples tend to have fewer claims. These and other statistics play a valuable role in determining auto insurance. After the age of 25, most insurance is fairly similar; young drivers in their teens and early twenties will have a more difficult time buying inexpensive coverage, however.

Where you live

The crime rate of your neighborhood will have a dramatic effect on your car insurance, as areas with a high incidence of crime will tend to have more stolen or vandalized vehicles. Additionally, weather plays an important factor. Areas with mild weather will have lower premiums than those with storms or floods.

The security of the vehicle

If you keep your car parked on the street or in your driveway, you will pay more for insurance than if you keep it in a garage at night. You will also save money on car insurance by installing an anti-theft device in your vehicle.

Any after-market additions

The more additions you have to your vehicle to alter its value, the more your insurance premiums will rise. Sound systems, aftermarket spoilers or custom rims can all cause your rates to increase. These additions may not even be covered by your insurance policy, so be sure to check with your agent before you add any features to your car.

What type of vehicle you drive

The more expensive a vehicle is to repair or replace, the more it will cost to insure that car. Luxury vehicles and sports cars are the most expensive to insure; SUVs are also pricier than other cars. The cheapest vehicles to insure are usually minivans and midsize sedans.

The mileage you put on the car

If you commute frequently or travel for work, your rates will be higher than if you drive infrequently. Some insurance companies even have a program that allows you to install a mileage tracker in your vehicle that will report back to the company, allowing you to pay only for the mileage you actually drive.

Who will be driving your vehicle

Everyone who lives in your house and has access to your vehicle will be considered when determining your rates. If you live with a bad driver or one with a history of accidents, you might want to exclude them from your auto policy. This keeps his driving record from damaging your premiums, but also means that he can never drive your vehicle; if he were to cause an accident in your car, the claim would be denied.

There are dozens of individual factors involved in determining auto insurance rates. Because the interaction of all factors is so complex, your insurance company may not be able to tell you exactly what single element is affecting your insurance. As the single largest factor in your premiums is your driving history, however, this is the most important thing to focus on when trying to improve your rates. You can also ask your insurance agent if there are any special programs or discounts you can take advantage of in order to reduce your premiums.