Auto insurance rates are calculated based on a number of factors. The insurance company uses a proprietary formula to determine the level of risk that a driver presents for car insurance purposes. The exact formula is confidential and each company may give different weight to the criteria, which include the following:
- Driver’s age
- Marital status
- How long he or she has been licensed
- Driving record
- Make and model of the vehicle being insured
- Annual mileage
- Whether the car is equipped with safety or anti-theft devices
In some states, auto insurance companies can pull an applicant’s credit history when deciding whether to offer to extend coverage and how much to charge for it. Some states specifically bar insurance providers from using this information to make decisions about coverage, though.
Young drivers are charged higher rates for their coverage than people who have been licensed for a number of years. They are more likely to be involved in accidents, and present a higher level of risk to the auto insurance company. Young male drivers are charged some of the highest rates for their coverage of any class of drivers, but rates should start to become more affordable once the driver celebrates his or her 25th birthday.
Driving record is another important factor when insurance companies are setting rates for coverage. People who have a history which includes accidents and/or moving violations will be paying more for their coverage than individuals who have a clean record.