Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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In a nutshell...

  • Any commercial use of a vehicle can often lead to denial of car insurance
  • Women drivers typically pay less and car insurance for young drivers is always higher
  • State laws play a big role in auto insurance as they influence how much liability an insurance company is exposed to in a car accident

The cost of car insurance is calculated by car insurance companies using a risk formula. Every applicant is scored on the basis of “how much risk they are too likely to file a future claim”.

Every auto insurance company has a different risk formula and how they apply your level of risk to a dollar value.

Enter your zip code above to get FREE car insurance quotes today!

Who determines how much car insurance will cost?

There is no single person who can simply provide you with an insurance quote off the top of their head but rather an entire department of people called actuaries who study mathematical formulas for a living.

Car insurance companies spend tens of millions of dollars annually measuring risk and manipulating variables to further improve profitability.

Almost 75 percent of all Actuaries work in the insurance industry and starting salaries can easily surpass $100,000. It is the collective work of these actuaries that enable insurance companies to provide instant quotes.

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What factors affect the cost of auto insurance?

Generally, drivers fall into 3 categories of risk: 

  • Preferred Risk
  • Acceptable Risk
  • High Risk

Some car insurance companies only insure preferred risk drivers, also known as good drivers as these drivers generally get the good driver discount, while others may insure a combination of drivers of any risk.

The most important factors used to determine how much car insurance will cost for a particular driver includes:

–Age

Age plays a huge role when it comes to car insurance. As people age, their reflexes and vision start to dull which in turn increases the risk of a car accident.

This is why elderly people are considered high-risk drivers and have to pay more for their insurance.

–Driving Record

Good drivers are generally aged over 25 with 5 or more years as a licensed driver and have a clean driving record for at least 3 years.

Accidents, moving violations, and traffic-related crimes are all considered high risk and while you may be fortunate enough to find an auto insurance company who will overlook a single accident or high-risk activity will cause you to have a hard time finding affordable car insurance.

–Where you live

State laws play a big role in auto insurance as they influence how much liability an insurance company is exposed to in a car accident.

For this reason, each state has different risk levels and car insurance companies compensate premiums to adjust for these higher/lower risk levels.

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–Type of Vehicle

Inuring a Toyota Camry or a Bugatti Veyron obviously comes with higher risk. Replacement value, vehicle repair costs and vehicle safety equipment all play a role in how much car insurance will cost.

Generally the more expensive a car, the higher the cost of insurance.

–Your Credit Score

People with poor credit scores are proven to be more likely to file a car insurance claim so where there is fire there are higher car insurance rates.

As a group, your fellow citizens are the higher risk so even though you swear you paid your bill on time the insurance company is still going to ding you like the banks, credit card companies, mortgage companies and everybody else.

–Annual Mileage

How much you will use the vehicle also plays a big role since the more you drive the more exposure you have to a potential car accident.

A typical use of a vehicle is considered between 7,500 and 15,000 miles a year and if you plan on driving more there may be an extra premium cost.

However, if you plan to drive less than 7,500 miles a year you should inquire about low mileage car insurance policies as they can often save up to 50 percent or more on premiums.

–Prior Car Insurance History

Have you ever filed a claim, had car insurance canceled for non-payment or let a policy lapse?

Your history with auto insurance can play a big factor and depending on your past history some events can actually cause you to be denied coverage without further consideration by some car insurance companies.

–Use of the vehicle

Do you typically use the vehicle for commuting to work and other common activities or are you slapping your vehicle around town for work since your boss can’t afford to pay for a car?

Without knowing your risk level its impossible to provide a customized quote but the national average car insurance rates are between $1,000 and $2,200 for most good drivers.

The best way to find out the cost of auto insurance is by doing a car insurance comparison search. This will help you understand your risk profile better and lead you to compare current market rates.

Enter your zip code below to get FREE car insurance quotes today!