Factors that determine your auto insurance premium

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When you’re buying auto insurance, a range of unexpected factors can impact your rates. For instance, you’re probably aware that insuring a sports car will cost more than a mid-sized sedan. But other factors, like your location, credit history, gender, and even marital status, play a role in determining your car insurance rates.

For example, if you have a history of accidents, traffic violations, and claims, you’ll pay more for auto insurance than someone who has a clean driving record with no accidents or violations. Age is another crucial factor in determining your rates. Statistics show that younger drivers, particularly teenagers, are more likely to be involved in accidents, which makes them riskier to insure. As a result, young drivers often face higher premiums.

However, each insurer judges each factor differently, so it’s important to shop around to get the right policy.

Read on to learn more about everything that goes into determining your auto insurance premium.

1. Your reports

Insurance companies don’t operate on the honor system when you tell them how long your commute is, or whether you’ve gotten any speeding tickets. Typically, the carrier will pull reports on your mileage, vehicle registration and undisclosed drivers who live with you. The insurance company will also check to see whether you’re a homeowner and what insurance company you currently use.

The reports are used to calculate your insurance score, which is similar to a credit score. 

2. Your vehicle’s ISO rating

The  International Organization for Standardization (ISO) has a Vehicle Series Rating program that assigns a symbol to each vehicle within a vehicle series, which is defined by characteristics such as make, model and safety ratings. Insurers use these ratings to set premiums for a specific type of car based on the loss history of that vehicle. 

The higher the ISO rating, the greater the risk for the insurance company, which translates into a higher premium for you. There are ratings for the physical damage, liability and medical portions of a car insurance policy. You’ve probably never seen your car’s ISO rating, but the insurance underwriter can easily see where your vehicle falls on the list.

Not all insurers use ISO symbols to set rates, so it’s important to shop around.

3. Traffic violations

Not all traffic tickets are equal. Some types of tickets won’t affect your rates — typically parking, equipment and other non-moving offenses.

However, some offenses trigger insurance points. The points are added up to determine how much your rates will rise. You can ask your car insurance company for a copy of its surcharge schedule, but you may still need an agent to decipher it.

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4. How many claims you’ve filed

Car insurance companies have strict rules about when surcharges are applied after an accident or claim, and they vary by insurer. The type of claim also plays a role. For instance, a bodily injury claim may hike rates more than a property damage claim. Talk to your insurance agent about your situation.

5. Multiple accidents

Too many accidents or claims within a certain period will lead to higher rates or non-renewal. Violations could include a DUI, license suspension or revocation, multiple traffic offenses, a conviction for leaving the scene of an accident, or insurance fraud.

6. Letting your car insurance policy lapse

Paying your car insurance premiums on time is crucial to keeping your costs down. In fact, if you let your insurance coverage lapse, you might lose your driving privileges and then have to pay a fine to reinstate them. This amount varies by state, but in some places, it can amount to hundreds — or even thousands — of dollars. 

In addition, when you go to reinstate your insurance coverage, you may pay dearly thanks to the lapse. A lapse can increase your rates by 11-22%, according to Insurance.com data.

How to get lower premiums

Car insurance discounts aren’t always spelled out on a company’s website, but agents know what is offered. Your agent can tell you if your insurer offers a discount for taking a driver improvement course, a child going off to college, early renewal, or if you go paperless, just to name a few.

Your agent can also tell you which safety features on a vehicle earn you a discount, whether your insurer offers a discount for bundling your insurance plans — such as home and car — and what the mileage threshold is for getting a low-mileage discount.

Some car insurance companies also offer discounts for certain occupations and affiliations, but it’s hard for policyholders to get a complete list. Your agent should have such a list and seeing it can help you discover if you’re missing out on a discount, or if you can gain a price break easily by joining a listed organization.

Agents won’t always offer this information unless asked, so make sure to ask.