How does an auto insurance company determine my premium?
Asking the question, "how does an insurance company determine my premium?" means you're serious about what coverage you have. Auto insurance companies determine your premiums through several factors, such as driving record, credit history, and age. On average, car insurance companies charge $90 to $268 for full coverage insurance. However, your personal factors determine your rates. Shop around and compare multiple insurance companies to get the best insurance rates.
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Brandon Frady
Licensed Insurance Agent
Brandon Frady has been a licensed insurance agent and insurance office manager since 2018. He has experience in ventures from retail to finance, working positions from cashier to management, but it wasn’t until Brandon started working in the insurance industry that he truly felt at home in his career. In his day-to-day interactions, he aims to live out his business philosophy in how he treats hi...
Licensed Insurance Agent
UPDATED: Mar 20, 2023
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We partner with top insurance providers. This doesn’t influence our content. Our opinions are our own.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Mar 20, 2023
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We partner with top insurance providers. This doesn’t influence our content. Our opinions are our own.
On This Page
- Driving record and credit history are significant factors when determining rates
- Age is also a major factor when calculating auto insurance rates
- Where you live affects how much you pay for auto insurance
- Your vehicle can determine your auto insurance cost
- Occupation status affects auto insurance quotes
Have you ever wondered how car insurance companies determine your rates? There are several ways insurance companies calculate what you will pay for a policy.
But are prices determined differently for each person? Don’t worry – we’re here to help.
Our guide explains how auto insurance companies determine your rates and why you should compare auto insurance before buying a policy.
Continue reading to learn how an auto insurance company can determine your premium. If you’re ready to compare multiple insurance quotes right now, enter your ZIP code in the free online quote tool above.
How does an auto insurance company determine my premium?
Car insurance companies use various characteristics to determine how much you pay for monthly coverage. Each characteristic is a snapshot of how risky a driver is to insure.
Before we break down how each factor affects auto insurance rates, let’s look at the average cost from the best insurance companies in the United States.
| Companies | Car Insurance Rates |
|---|---|
| *Industry Average | $260 |
| Allstate | $318 |
| American Family | $224 |
| Farmers | $288 |
| Geico | $179 |
| Liberty Mutual | $398 |
| Nationwide | $229 |
| Progressive | $283 |
| State Farm | $235 |
| Travelers | $287 |
| USAA | $161 |
USAA, Geico, American Family, Nationwide, and State Farm are the cheapest companies in America. However, your rates may vary.
Your personal factors have a significant impact on car insurance quotes.
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How are auto insurance rates determined by driving record?
One of the most significant factors that affect auto insurance is your driving record. Your driving history is a report card of your driving activity. If you can keep accidents and traffic violations off your history, you can secure affordable car insurance rates.
Let’s compare the cost of auto insurance based on driving records.
| Companies | Monthly Rates with a Clean Driving Record | Monthly Rates w/ One Speeding Violation | Monthly Rates w/ One Accident | Monthly Rates w/ One DUI Conviction |
|---|---|---|---|---|
| Allstate | $318 | $374 | $416 | $522 |
| American Family | $224 | $252 | $310 | $361 |
| Farmers | $288 | $340 | $377 | $393 |
| Geico | $179 | $220 | $266 | $406 |
| Liberty Mutual | $398 | $475 | $517 | $634 |
| Nationwide | $229 | $259 | $283 | $379 |
| Progressive | $283 | $334 | $398 | $331 |
| State Farm | $235 | $266 | $283 | $303 |
| Travelers | $287 | $355 | $357 | $478 |
| USAA | $161 | $183 | $210 | $292 |
DUI convictions and car accidents have the most impact on auto insurance quotes. Traffic infractions and accidents can drive up your monthly rates by hundreds of dollars.
Does credit history determine auto insurance rates?
It depends on the state where you live. Most states allow auto insurance companies to use credit to determine your risk.
Excellent credit generates cheap auto insurance because the insurance company connects an excellent credit score to a low risk of filing claims. But bad credit does the opposite.
Let’s examine how the top car insurance companies calculate rates based on credit.
| Companies | Rates with Good Credit | Rates with Fair Credit | Rates with Poor Credit |
|---|---|---|---|
| USAA | $152 | $185 | $308 |
| State Farm | $181 | $238 | $413 |
| Geico | $203 | $241 | $355 |
| American Family | $224 | $264 | $372 |
| Nationwide | $244 | $271 | $340 |
| Progressive | $302 | $330 | $395 |
| Farmers | $306 | $325 | $405 |
| Allstate | $322 | $382 | $541 |
| Travelers | $338 | $362 | $430 |
| Liberty Mutual | $366 | $467 | $734 |
| Average | $264 | $307 | $429 |
USAA is the cheapest company, but State Farm has passed Geico and American Family. You can pay hundreds of dollars less per year if you have exceptional credit.
Why do auto insurance companies use age to determine rates?
Age shows the driving experience of most drivers. It’s uncommon for new drivers to be 25 and older, but new adult drivers have more expensive rates.
Teens and young adults produce the highest car insurance rates in the nation. Drivers from age 16 to 24 have a higher risk of filing auto insurance claims.
How much is car insurance based on age? Let’s look at the monthly rates from multiple insurance companies to learn that answer.
| Companies | Auto Insurance Rates Based on a Clean Driving Record | Auto Insurance Rates with a Young Adult Driver (20 to 24) | Auto Insurance Rates with a Teen Driver (16-19) |
|---|---|---|---|
| Allstate | $318 | $382 | $414 |
| American Family | $224 | $269 | $292 |
| Farmers | $288 | $346 | $375 |
| Geico | $179 | $215 | $232 |
| Liberty Mutual | $398 | $477 | $517 |
| Nationwide | $229 | $275 | $298 |
| Progressive | $283 | $339 | $368 |
| State Farm | $235 | $282 | $306 |
| Travelers | $287 | $345 | $373 |
| USAA | $161 | $193 | $209 |
| **National Average** | $260 | $312 | $338 |
As predicted, people 24 and younger are connected to more expensive auto insurance. Car insurance can be up to 30% less for experienced drivers who are 25 and older.
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Does an auto insurance company determine rates based on the vehicle I drive?
Your car is also a significant factor when determining auto insurance. Auto insurance companies want to know the make and model year of the vehicle you want to insure.
Drivers can get more accurate quotes if they use the VIN. Let’s see the car insurance rates for the most sold vehicle in the United States last year.
| Companies | Average Monthly Rates |
|---|---|
| Geico | $35 |
| State Farm | $50 |
| Progressive | $52 |
| USAA | $57 |
| Erie | $59 |
| Nationwide | $69 |
| American Family | $73 |
| Safeco | $75 |
| Aculty | $79 |
| Country | $81 |
| Allied | $82 |
| Vermont Mutual | $82 |
The Ford F-150 is one of the most popular vehicles in America. These rates were based on the 2018 Ford F-150.
Therefore, auto insurance rates for older model-year F-150s have cheaper rates, but newer F-150 models have more expensive rates.
Do auto insurance rates change for each state?
According to the National Association of Insurance Commissioners (NAIC), the national average for auto insurance is $90 per month ($1,080 per year). Car insurance varies for each state in America, though.
Here’s an extensive look at the cost of insurance for each state and different coverages in the United States.
| States | Average Monthly Liability Rates | Average Monthly Collision Rates | Average Monthly Comprehensive Rates | Average Monthly Full Coverage Rates |
|---|---|---|---|---|
| Alabama | $37 | $28 | $14 | $79 |
| Alaska | $47 | $31 | $12 | $90 |
| Arizona | $48 | $25 | $16 | $89 |
| Arkansas | $36 | $29 | $17 | $82 |
| California | $45 | $36 | $8 | $88 |
| Colorado | $49 | $25 | $17 | $91 |
| Connecticut | $59 | $32 | $11 | $102 |
| Delaware | $69 | $28 | $11 | $107 |
| District of Columbia | $58 | $41 | $19 | $118 |
| Florida | $76 | $26 | $11 | $113 |
| Georgia | $55 | $30 | $14 | $98 |
| Hawaii | $39 | $27 | $9 | $75 |
| Idaho | $32 | $20 | $10 | $62 |
| Illinois | $40 | $27 | $11 | $77 |
| Indiana | $34 | $22 | $11 | $67 |
| Iowa | $27 | $19 | $16 | $62 |
| Kansas | $32 | $23 | $21 | $76 |
| Kentucky | $47 | $24 | $12 | $83 |
| Louisiana | $73 | $37 | $19 | $128 |
| Maine | $30 | $23 | $9 | $62 |
| Maryland | $55 | $31 | $13 | $100 |
| Massachusetts | $52 | $34 | $12 | $98 |
| Michigan | $72 | $37 | $13 | $121 |
| Minnesota | $39 | $20 | $16 | $76 |
| Mississippi | $41 | $29 | $18 | $88 |
| Missouri | $38 | $24 | $16 | $79 |
| Montana | $34 | $23 | $21 | $77 |
| Nebraska | $33 | $21 | $20 | $74 |
| Nevada | $64 | $27 | $10 | $100 |
| New Hampshire | $35 | $26 | $9 | $70 |
| New Jersey | $76 | $33 | $11 | $119 |
| New Mexico | $44 | $24 | $15 | $84 |
| New York | $71 | $34 | $15 | $120 |
| North Carolina | $31 | $26 | $11 | $67 |
| North Dakota | $25 | $22 | $20 | $67 |
| Ohio | $35 | $24 | $10 | $69 |
| Oklahoma | $40 | $27 | $20 | $88 |
| Oregon | $53 | $20 | $8 | $81 |
| Pennsylvania | $43 | $29 | $13 | $85 |
| Rhode Island | $68 | $36 | $11 | $116 |
| South Carolina | $50 | $24 | $16 | $89 |
| South Dakota | $26 | $19 | $24 | $69 |
| Tennessee | $37 | $27 | $13 | $77 |
| Texas | $49 | $33 | $19 | $101 |
| Utah | $45 | $23 | $10 | $78 |
| Vermont | $30 | $26 | $11 | $68 |
| Virginia | $38 | $25 | $12 | $74 |
| Washington | $53 | $24 | $9 | $86 |
| West Virginia | $43 | $28 | $18 | $88 |
| Wisconsin | $33 | $20 | $12 | $65 |
| Wyoming | $29 | $24 | $23 | $75 |
| **National Average** | $48 | $29 | $13 | $90 |
Michigan and Louisiana have the highest monthly rates.
Full coverage auto insurance is the most expensive, but it provides the most coverage. Liability insurance is required in most states but has the least coverage.
Collision and comprehensive are optional, but they cover vehicle damage in incidents.
Collision insurance covers an accident regardless of fault, and comprehensive coverage pays for damage from unforeseen accidents, such as sudden fires, flooding, storms, vandalism, and car theft.
Is auto insurance determined by my occupation?
Your occupation may come up during the quote process. Where you work indicates risk. Some careers correlate to higher chances of filing claims.
Here’s an example of how Geico calculates auto insurance rates for high-risk and low-risk occupations.
| High-Risk Occupations | Monthly Rates | Low-Risk Occupations | Monthly Rates |
|---|---|---|---|
| Chef (Without a High School Diploma) | $173 | Homemaker | $68 |
| Chef (With a High School Diploma) | $173 | Professor (With a College Degree) | $72 |
| Currently Unemployed | $165 | Military Officer (Air Force O1) | $139 |
| Actor | $165 | Retired Military (Air Force O6) | $139 |
| Waiter/Bartender/Host | $165 | Psychiatrist | $145 |
| Athlete | $165 | Military E5 | $146 |
Low-risk occupations have cheaper monthly car insurance rates. Combining other favorable factors (such as a clean driving record and good credit) can save hundreds of dollars more.
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Can my education level determine rates at an auto insurance company?
Although your education level is a minor factor that affects your car insurance rates, it can provide at least 5% off. People with college degrees pay less for auto insurance because higher education levels are associated with a low risk of filing claims.
Check out the way education levels determine car insurance quotes for individuals in military and chef careers.
| Education Levels | Monthly Rates |
|---|---|
| No High School (Military E-5) | $146 |
| High School (Military E-5) | $146 |
| Associate's (Military E-5) | $146 |
| Bachelor's (Military E-5) | $146 |
| Master's (Military E-5) | $146 |
| PhD (Military E-5) | $146 |
| Associates (chef) | $165 |
| Bachelor's (chef) | $165 |
| Master's (chef) | $165 |
| PhD (chef) | $165 |
| No High School (chef) | $173 |
| High School (chef) | $173 |
Drivers without high school diplomas pay more unless they are in the military. People in the military usually pay less for auto insurance because of the discounts provided by auto insurance companies. When you compare multiple insurance companies, you’ll still get various rates.
How do you get more affordable auto insurance rates?
Don’t get discouraged by the sample car insurance rates you’ve seen in the article. There’s a chance that you can get cheaper auto insurance with your personal factors.
Here are five ways you can secure affordable car insurance.
- Get a higher deductible
- Qualify for more auto insurance discounts
- Drive less
- Purchase a car with safety features and anti-theft features
- Switch to liability-only coverage if necessary
Did we miss anything? Continue exploring different companies until you find the best and most affordable insurance policy.
Can more expensive auto insurance rates lead to better coverage?
No, they can’t. Spending more on car insurance every month doesn’t guarantee good coverage.
Some insurance companies may be expensive but may not provide the coverage you need. There’s a way to find a balanced medium between cost-efficient insurance and sufficient coverage.
Enter your ZIP code below to compare auto insurance rates.
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Determine My Premium: The Bottom Line
Auto insurance companies determine rates based on multiple factors. Characteristics related to higher risks of filing claims generate more expensive car insurance rates.
If you want to see how auto insurance companies determine your premium, enter your ZIP code in our free comparison tool below to compare multiple insurance companies near you.
Enter your ZIP code below to compare auto insurance rates.
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Brandon Frady
Licensed Insurance Agent
Brandon Frady has been a licensed insurance agent and insurance office manager since 2018. He has experience in ventures from retail to finance, working positions from cashier to management, but it wasn’t until Brandon started working in the insurance industry that he truly felt at home in his career. In his day-to-day interactions, he aims to live out his business philosophy in how he treats hi...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.