Auto & Home

Calculating Your Car Insurance Premium and Six Ways to Save

3 min read
Oct 08, 2020

If you’re hoping to save money on car insurance, it’s important to first understand how your premium is determined, and how dramatically these premiums can vary. Here are six of the factors that can influence how much you pay and what you can do to save.

1. Your driving record

Your record plays a crucial role in determining premiums. If you’ve been involved in an accident that was determined to be your fault, or if you have traffic convictions on your record, you may pay more for your insurance. Statistics indicate that these types of drivers generally have repeat accidents or violations within three years. For drivers with poor records who cannot find coverage, there are state-regulated insurance plans called “assigned risk pools” or “shared markets.” In these plans, the state assigns a company to provide coverage for a high-risk driver.

How to save: To take advantage of good driver discounts, drive responsibly, obey speed limits, and always wear your seatbelt.

2. The car you drive

Certain car models may be considered higher risk because they cost a lot to repair, are frequently involved in accidents, or are popular with car thieves. Owning one of these cars may double your collision and comprehensive premiums. High-performance and sports cars, for example, usually cost more to insure.

How to save: Ask your insurance agent about premiums for specific cars before you buy. If buying new, choose a safer vehicle. Check to see if the vehicle has high safety ratings.

3. Where you live

Rates are regulated on a state-by-state basis—so, rates in California and rates in Rhode Island will differ. Rates also vary between locations within a state. The risks of accidents can change significantly from one community to another. For example, people living in small towns generally have fewer auto accidents than people living in large cities, so they may pay less for insurance. Other variables include average regional weather conditions and local auto repair prices.

How to save: No matter where you live, you can save if you don’t drive much. Ask about a restricted mileage discount if you drive fewer than 7,500 miles annually.

4. Age and relationship status

As a general rule, since drivers under the age of 25 have more accidents than older drivers, they pay more. Statistically, young married drivers have fewer accidents than young single drivers, so they generally pay lower premiums. Drivers between 50 and 65 years of age have low accident rates and are sometimes offered discounts. Past the age of 65, accidents seem to increase and rates generally begin to rise again. Someone over 70 may have trouble finding an insurer to accept them as a new customer, and when they do find coverage, it may be expensive.

How to save: If you are between the ages of 50 and 65, ask about mature driver discounts. Still in school? Good-student discounts are sometimes offered for drivers under age 25 who have maintained B averages for the preceding semester in high school or college.

5. Gender

A young man under age 25 generally pays more than a woman of the same age. Young men are typically involved in more accidents than young women and have more than three times as many fatal accidents.

How to save: You can receive discounts for taking driver training, driver improvement, and/or defensive driving courses. The National Safety Council offers several courses in English and Spanish for younger drivers.

6. Your family members

Insurance premiums reflect not only your own age, gender, and driving record, but also those of other licensed drivers in your household. A teenage son who drives your car or a spouse with a poor driving record will likely increase your insurance premium.

How to save: The bright side to multiple drivers? Multi-car discounts. You may also receive discounts for adding homeowners or life insurance from the same company.

Nothing in these materials is intended to be advice for a particular situation or individual. These materials are for general information purposes only.