How are car insurance quotes calculated?

By helping you meet most U.S. states’ liability requirements for bodily injury and property damage, car insurance protects you from financial loss due to a car accident.

Finding the right type of car insurance starts with getting several free car insurance quotes and comparing prices.

To help you make an informed choice and keep your costs down, here’s what you need to know about how car insurance quotes are calculated in the first place.

What factors do car insurance companies look into for insurance quotes?

Though the ways that car insurance companies calculate their rates varies from company to company, these are the factors that may determine your initial car insurance quote:

1. The car you drive

Car insurance companies will consider their company’s experiences with certain makes and models and evaluate the risks. A large, luxury vehicle or a notoriously unreliable one will cost more to insure than a smaller and more reliable vehicle. Sports cars are a red flag since they’re associated with higher speeds and are more prone to accidents. Cars that have been upgraded and modified will cost more to fix if something goes wrong.

The car you drive plays a big role on what you’ll have to pay. The more expensive your car, the more it’ll cost you to insure it.

2. Where you drive

Your location is factored in for various reasons.

One of them is that the amount of coverage you’re required to have will vary by state. According to Nerdwallet’s recent Car Insurance Costs Comparison, Maine is the cheapest state for full coverage while Louisiana is the most expensive state.

The type of setting you’re in has different levels of risk as well. For example, in safe, suburban areas, there are less instances of theft and car accidents when compared to living in a big city. On the other hand, in some rural areas, your premium could be more expensive due to specific conditions that are likely to cause road accidents, like an area with a high deer volume.

3. How often and how far you drive throughout the year

Using a car for business or having long-distance commutes to work generally means a higher car insurance premium. The more time you spend on the road, the higher likelihood for a car accident. This is why the annual and current mileage of your car is factored in.

To lower their car insurance price, drivers will opt for taking public transportation or riding their bikes to and from work. A reduction of total annual driving mileage will lower the car insurance premium.

4. Your driving record

The Department of Motor Vehicles (DMV) has a record of all your moving violations and car accidents/collisions on file. 

Insurance companies will look at the record for the state where you currently hold your license as well as other states where you’ve driven. They may look at records of just the last three years or look at the last 10 years of your driving history. It depends on the car insurance company. 

Traffic violations and accidents are red flags for car insurance providers, and you will have to pay a higher premium if they see many of them on your record.

5. Your age

Younger drivers are quoted higher premium prices because they have less driving experience. 

Younger drivers are also generally associated with reckless driving. According to a study by the National Highway Traffic Safety Administration (NHTSA), teens are more likely to speed, make avoidable mistakes on the road and engage in riskier driving practices, especially when other people are in the car. Higher car insurance rates usually go to people between the ages of 17-24.

Elderly drivers are likely to pay higher premiums too, despite posing a lesser risk on the road. 

Does your gender play a factor in car insurance quotes?

Gender can sometimes play a factor in car insurance quotes. Younger men are likely to pay more than women the same age. 

For drivers over the age of 25, there are no huge differences in price between men and women. 

6. Your credit history

Unless you live in the states of California, Massachusetts, Michigan or Hawaii where it’s been banned, insurance companies will be able to look at your credit score to predict your accident potential.

Independent studies throughout the years have measured the relationship between credit history and risk. People with lower credit scores due to past-due payments or a high amount of debt are generally more likely to make more car insurance claims. If you have good credit, it can save you a lot of money.

Car insurance quotes calculations will vary from company to company

The factors above don’t apply to every insurance company. They each have slightly different ways to decide on your quote. Shopping around for insurance quotes is essential. This is the only way to ensure you’re finding the best possible deal.

Insurance Guide Pro makes it easy to shop around by quickly gathering quotes from top car insurance companies using basic information about you and your car. Learn more today!