5 Factors That Affect the Cost of Your Auto Insurance

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KEY POINTS

  • Insurers consider many key factors when setting premiums.
  • Driving record affects auto insurance costs.
  • A policyholder's location can also affect the price of coverage.


Drivers may be surprised at all the things that affect coverage costs.

Auto insurance is an important purchase to protect assets -- and it's also required by law to have certain kinds of coverage. Since car insurance is mandated, every driver needs to pay for a policy.

But how much will coverage cost exactly? Auto insurance premiums can vary for many reasons, but here are five of the most important factors that impact the price of car insurance

1. Driving record

The policyholder's driving record is the single most important factor that affects auto insurance premiums. That's because car insurers price policies based on the risk of having to pay out a claim. A driver who has a history of unsafe behavior -- as shown by a series of accidents or speeding tickets -- is much more likely to cause a crash that results in an insurer having to pay out money. 

Insurers will ask about past accidents, moving violations, or issues such as drunk driving convictions. The more black marks on a motorist's record, the higher premiums will be. And in some cases, lots of past problems could even result in a denial of coverage when applying for auto insurance. 

2. Other drivers on the policy

Many people who buy auto insurance coverage have other people in their household who will be driving as well. This could include, for example, spouses or children. Since the auto insurer could get stuck paying out a claim if these other drivers cause a crash, the insurer will want to know who else might get behind the wheel -- and how their driving history looks.

Unfortunately, this can mean that people with teen drivers in their household, or whose spouses have been in a lot of accidents, could end up paying much more for a car insurance policy. 

3. The extent of coverage

The amount of auto insurance coverage a motorist buys also affects premium costs. After all, if a driver gets more protection -- such as a liability policy that would pay out more than the minimum or a comprehensive policy that pays for losses caused by theft or other non-accident causes -- then there's a greater chance an insurer will end up having to pay a lot of money if a claim is made. 

In many cases, it actually makes sense for drivers to pay higher premiums to get more than the minimum required auto insurance coverage. This enables motorists to ensure they are protecting their assets and won't face out-of-pocket losses if the worst happens.

4. Home location

Where a driver lives can affect the chances of accidents or other issues with the car, such as vandalism or theft. As a result, insurers want to know where the motorist lives and whether the car will be kept in a garage. If a neighborhood isn't very safe and there is a greater chance of a problem, insurance premiums will be higher. 

5. Vehicle choice

Finally, a driver's choice of cars affects premiums. Some cars are safer than others, and some cars are more prone to being stolen than others. If a particular car has a higher-than-normal rate of accidents or is especially likely to be a target of thieves, costs could go up. 

Drivers need to be aware of all these factors so they can take steps to try to avoid increasing their auto insurance costs unnecessarily. By choosing a vehicle carefully and avoiding a history of accidents, motorists can make sure premiums remain as affordable as possible.

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