What Really Determines Your Auto Insurance Rate?

How do insurance companies determine what rate you will pay? What can you do to ensure you get the best rate?

It can seem like a deep mystery when you get your monthly auto insurance bill. Behind the scenes there are several calculations that determine how much you will pay.

Your Driving Record

By far the most important determinant of your rate is your driving record. Insurance companies will look how many accidents you have been in. Insurance companies want to see that you have a clean driving record. We can’t always control how we drove in the past. Lucky for us, there are ways to remove accidents from a driving record

Insurance Claims Made in the Past

Insurance companies value not making auto insurance claims in the past. They want to see that you will not be getting into future accidents. For instance, if you have been in three accidents in the past, they look at you as likely to get into another accident.

Think about whether you should file an insurance claim for small paint ding issues. It may be more beneficial to fix small issues yourself. DIY shops like Home Depot sell paint chip kits. These allow you to match the paint from your vehicle and fix minor scrapes. Fixing the issue yourself rather than filing a claim can save you thousands.

Your Age, Gender, and Marital Status

Did you know you can get a lower insurance rate by being married? Insurance companies look at married people over 25 as lower risk to insure. This will help you score a great rate.

Females also pay less to drive a car than males. This is due to females getting in less accidents on average than males.

The Type of Car You Drive

A red sports car may seem like a fun drive, but you will pay more for insurance than a used grey Toyota Camry. Make sure you check with your insurance agent before you buy a new car. They can give you advice on how much your auto insurance rate will go up depending on the car you buy.

Special State Formulas

Certain states impose restrictions on what factors insurance companies can use to raise or lower your rates. For instance, California bans insurance companies from using credit scores as a determinant of auto insurance rates. These type of laws can help consumers get better (or worse) deals when paying for insurance.

Check with your local DMV to see if there are any special considerations based on the State you live in.

About Author

Samantha Davis - Lead Reporter

Samantha Davis is a lead reporter for Finance Hound. She covers the financial world; specializing in autos, consumer finance and insurance. She enjoys reading with a glass of wine, and traveling with her lovely family.