What Drives the Cost of Auto Insurance? It’s Personal

According to an annual report by AAA, the average cost of auto insurance was $1,194 in 2019, but premiums ranged from $1,089 for a small SUV to $1,328 for a small sedan.1 AAA insurance cost estimates are based on a full coverage policy for a driver who is under 65 years of age, has more than six years of driving experience, has had no accidents, and lives in a suburban/urban location.

Auto policy premiums can vary widely because they are personalized for each policyholder using mathematical formulas that reflect the perceived level of risk. Here’s a closer look at the primary factors that typically determine the price of auto insurance and some tips to help lower your own premiums.

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How Do You Rate?

  • Driving record. If you have a clean driving record, you will generally pay less than drivers who have had accidents or received traffic violations. Inexperienced drivers may have to pay more for coverage than those who have been insured longer. Getting a citation for texting, speeding, or driving under the influence of drugs or alcohol could be especially costly.
  • Credit history. Many insurers use credit-based insurance scores to analyze the likelihood of someone filing a claim. Therefore, your debt levels and payment history could have a positive or negative effect on your premium costs.
  • Age and marital status. For example, teenagers and young drivers under age 25 are often charged more for coverage, and married drivers may be charged less.
  • Gender. Gender can influence the cost of premiums in some places. However, some states (including California, Massachusetts, Pennsylvania, Hawaii, and Montana) have passed laws that prohibit insurers from setting rates based on gender.2
  • Type of vehicle. Premiums are generally based on the current value of the automobile(s) to be covered, but they may also take into account the size of the engine, the cost of repairs, and the presence or lack of certain safety features and theft deterrents.
  • Number of miles driven. Spending a lot of time behind the wheel can increase the odds of being involved in an accident. Drivers who log more miles during the year will generally pay more for insurance, whereas occasional drivers may qualify for a discount.
  • Where you live and/or park your car. You may pay more if you live in certain states, in a ZIP Code where claims are prevalent, or in an area that is subject to higher medical or auto-repair costs.
  • Insurance bundling. Many companies will offer a discount if you buy more than one type of insurance, such as auto and homeowners. Some companies also offer a discount to long-time customers.
  • Filing claims. Filing even one auto insurance claim could significantly increase your premium. Any increase may be smaller when an accident is not your fault, but the claim might still impact your rate.

Cost Control

The types and level of coverage that you choose to purchase (over and above a state’s required minimum liability amounts) will also influence premium costs. A deductible — the amount a policyholder must pay before the insurer pays the balance of a claim — usually applies to comprehensive and collision coverage, which pay for damage to the vehicle (up to the policy limits) when you are responsible. In many cases, raising your deductible could help lower your premium costs.

If you have an older, inexpensive car, you might consider dropping optional comprehensive and/or collision coverage to save money. But keep in mind that this coverage may be required by the lender if you borrowed money to purchase your automobile.

Of course, driving carefully could help you avoid costly accidents and injuries and steer clear of steep premium penalties. You might also score additional good-driver discounts on auto insurance.