8 Factors That Decide Your Car Insurance Rates

American drivers are paying an average of $2,543 a year for full coverage car insurance, according to data from Bankrate’s 2024 True Cost of Auto Insurance report. That’s up 26% from 2023.

The reasons for this increase range from lingering inflation and the rising cost of repairs to an increase in auto theft and severe weather.

Of course, not everyone pays the same amount for auto insurance. Carriers look at a variety of factors to determine how much your premiums will be — some of which are under your control and some of which are beyond it.

Here, CNBC Select lifts the hood on what affects the price you pay for car insurance.

The 8 Thing that Determine How much You Pay Car Insurance

Where you live plays a big part in how much you pay for auto insurance. Because of the higher risk of theft, accidents and vandalism, drivers in densely populated urban areas tend to pay more than those in the suburbs or rural areas.

In addition, states set minimum requirements for liability insurance, the coverage you have to have to pay for damages to another car, driver or passenger. The amount your state mandates affects how much you pay.

Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah also require drivers to carry personal injury protection, according to the Insurance Information Institute (III), which pays the medical bills if you or a passenger is injured in an accident. The cost varies, but Liberty Mutual estimated that personal injury protection can add an average of 15% to 20% to your policy.

The result is a huge disparity in car insurance rates across the U.S.: Florida drivers pay an average of $3,945 a year (the highest in the country) while those in Vermont pay $1,353 per year (the lowest), according to Bankrate’s data.

Already one of the most affordable car insurance companies on the market, Geico offers drivers 16 different types of discounts — including up to 25% for a multi-vehicle policy.

Geico Auto Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

  • Policy highlights

    Geico coverage and services are available in all 50 states and the District of Columbia and there are 16 different types of discounts available. In addition to the standard coverage options, Geico offers various optional add-ons, such as emergency roadside assistance, rental car reimbursement and mechanical breakdown insurance.

Read our Geico Auto Insurance review.

Even one speeding ticket or accident can raise your rates, according to the III. Insurance companies will typically look at your driving record for the last three to five years but more serious violations, like a DUI or multiple speeding tickets, might be considered longer.

State Farm is one of CNBC Select’s top choices for high-risk drivers, with some of the most affordable rates among larger carriers for drivers with at-fault accidents, speeding tickets, DUIs and DWIs.

In addition, State Farm will issue an SR-22 or FR-44 certificate if required by your state.

State Farm Auto Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

  • Policy highlights

    State farm is one of the largest auto insurers based on market share and has an excellent reputation for customer satisfaction. It offers 13 discounts, including ones for safe driving and young drivers.

Read our State Farm Auto Insurance review.

In most states, your credit history helps determine how much drivers pay for car insurance. Your three-digit insurance score uses a lot of the same information your credit score does. Only California, Hawaii, Maryland, Massachusetts, Michigan, Nevada, Oregon and Utah restrict the use of credit information in determining insurance.

Drivers with poor credit (below 580) paid about 69% more for car insurance than those with exceptional credit scores (800 or above), according to a 2022 analysis by insurance comparison site The Zebra.

Nationwide uses a credit-based insurance score, but it has relatively low average rates for drivers with bad credit and offers a discount of up to 20% for bundling home and car insurance. In addition, Nationwide will reconsider your premium if your credit took a hit because of illness, natural disaster, divorce or other “extraordinary life circumstances.”

Nationwide Auto Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

  • Policy highlights

    Nationwide offers near-nationwide availability and personalized services, such as On Your Side® Review, a free annual insurance evaluation to ensure you are adequately protected and are taking advantage of any discounts available to you.

Women typically pay less for auto insurance than men, according to the III, because they’re less likely to be involved in accidents or serious violations and are more likely to wear seatbelts.

Seven states — California, Hawaii, Massachusetts, Michigan, Montana, North Carolina and Pennsylvania — prohibit the use of gender as a consideration in auto insurance rates or approvals.

You can’t do much about your age, but it plays a big part in the size of your car insurance bill. Younger people are newer to driving and their rates reflect that, especially drivers under age 25.

Some insurance companies offer discounts for students and young drivers that can make a dent in those premiums.

State Farm’s discount is worth up to 25% off for full-time high school or college students age 16 to 25 with at least a B average. It also has a Steer Clear discount worth up to 15% for under-25s who complete a safe-driving program and avoid moving violations or at-fault accidents for three years.

State Farm Auto Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

  • Policy highlights

    State farm is one of the largest auto insurers based on market share and has an excellent reputation for customer satisfaction. It offers 13 discounts, including ones for safe driving and young drivers.

Read our State Farm Auto Insurance review.

Premiums tend to decelerate as you cruise into middle age but tick back up again in your golden years. Drivers 70 and up pay $2,495 a year on average for full coverage, according to Bankrate, about $112 more than 50-year-olds and $187 more than 60-year-olds.

Farmers Insurance offers a 10% mature driver discount for customers over 55 who have completed an online safety course in the past three years. Farmers also has discounts for homeowners and ranks above average for handling claims on J.D. Power’s 2023 customer satisfaction survey.

Farmers Auto Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

  • Policy highlights

    Farmers sells car insurance in every state except Alaska, Delaware, Hawaii, Maine, New Hampshire, Rhode Island, Vermont, Washington, D.C., and West Virginia and offers a whopping 22 discounts.

Married drivers pay less for car insurance on average for a variety of reasons, including that they tend to be older and more experienced. If they have children, insurance companies predict they’ll be safer behind the wheel.

Most carriers require you to add your spouse to your policy, even if they never drive your car. A joint car insurance policy is usually cheaper than two individual ones, especially with a multi-car discount. If one of you has bad credit or a record of moving violations, though, it will likely raise both your premiums.

In some states, you can have your partner listed as an excluded driver so their record won’t affect your rates. But it also means if they ever drive your car and are in an accident, it won’t be covered.

Progressive allows spousal driver exclusions in states where it’s permitted and automatically extends small-accident forgiveness for claims under $500. Progressive also has a multi-car discount that saves drivers an average of 12% annually.

Progressive Auto Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

  • Policy highlights

    Progressive offers a number of lines of insurance to allow for bundling, and convenient tools to help you keep your coverage in your budget.

Read our Progressive Auto Insurance review.

Your rates could be higher if you’ve filed a lot of claims in the past or were held liable for accidents and had to pay for repairs. If you let your car insurance lapse, you may pay more too, depending on how long you went uninsured.

Amica topped J.D. Power’s 2023 survey of claims handling, earning a 909 out of 1,000.

Amica Auto Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • Policy highlights

    Amica offers a variety of auto insurance policies to fit your coverage needs. The company also offers a total of 18 discounts, including discounts for bundling and for students.

  • App available

Your vehicle’s make, model trim and body type all affect your monthly premiums. The rate for a flashy sports car with high-end trim and extra features will typically be higher than a standard SUV.

Even the age of your car is relevant: Since newer cars are usually worth more, they usually cost more to insure.

Electric cars can be more expensive to insure, as well, since repair costs tend to be higher. Lemonade offers a discount for EVs, however, as well as for bundling, safe driving, low mileage and paying in full upfront.

Lemonade Auto Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

  • Policy highlights

    Lemonade offers coverage for a variety of scenarios, including: car crashes, highway stalls, damage from fire, vandalism and weather, damaged glass and windshield, if you’re sued for liability and if your car gets stolen

Armed with the knowledge of how car insurance companies calculate your premiums, there are several simple steps you can take to make your rates more affordable.

Compare price quotes

Comparison shopping can save you a lot on auto insurance. Get quotes from at least three reputable companies that operate in your state, and make sure you’re requesting a policy comparable to your current one.

Find out what both your monthly premiums and deductibles would be, and if any discounts might lower that quote.

Maintain good credit

Paying down credit card debt can improve your payment history and lower your credit utilization ratio. For more help, Experian Boost is a free service that adds on-time payments to your phone bill and other utilities onto your Experian credit report, which can increase FICO-based insurance scores.

Experian Boost™

  • Cost

  • Average credit score increase

    13 points, though results vary

  • Credit report affected

  • Credit scoring model used

Results will vary. See website for details.

Bundle home and auto insurance

Getting car and home insurance from the same company is one of the easiest ways to earn a discount on both. (It also makes it easier to access all your accounts.) Allstate customers can save up to 20% when they bundle auto with homeowners or renters insurance.

Allstate Auto Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

  • Policy highlights

    Allstate offers auto insurance customers a total of 14 discounts in addition to a pay-per-mile car insurance program. It offers quotes by phone, through an agent, or online. The company also offers a number of other insurance products to bundle your coverage and save.

Allstate Renters Insurance

  • Cost

    Starts at $4/month when bundled with auto insurance; premium depends on the coverage amount you choose

  • Maximum coverage

  • App available

  • Policy highlights

    Allstate’s renters insurance coverage includes additional living expense coverage with its standard policy. Allstate renters insurance covers theft, fire and smoke, vandalism and water damage from plumbing, furnace, air conditioning and water heaters.

  • Does not cover

    High-value items, flood damage, earthquake damage; additional coverage can be purchased for these instances

Pay your annual premium in full

Liberty Mutual is among the companies that offer a discount for paying your auto policy in one or two annual payments. You can also save with automatic payments from a bank account and for going wireless.

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