Car Insurance: Factors That May Affect Your Premium

Different factors affect how much you'll pay for car insurance. You can control some factors, but not others.

By | Updated by Stacy Barrett, Attorney

An insurance premium is the amount you pay for a car insurance policy. Most people pay a car insurance premium monthly. The price of your premium depends on the type of coverage you buy and other factors, including your:

  • vehicle
  • driving history and habits
  • claims history
  • credit score
  • where you live, and
  • your age and gender.

How Vehicle Choice Affects Your Premium

You have some control over an important factor affecting your premium—the car you choose to drive. Car insurance premiums are partially based on the potential cost of car repairs and the risk of claims associated with specific vehicles.

Cars with High Insurance Premiums

Sports cars, high-end luxury cars, and electric vehicles typically require higher premiums. According to Forbes, the most expensive car to insure in 2022 is the Tesla Model S Performance. You should get a car insurance quote before you buy a car so you don't get stuck with an unexpectedly high insurance premium.

Safety Feature Discounts

You might get a discount on your car insurance if your vehicle has certain safety features. For example, vehicles with daytime running lights, anti-lock brakes, electronic stability control, airbags, and anti-theft systems often qualify for a discount. Newer safety features—like automatic braking, lane assist, blind-spot detection, and video-assisted reverse—may provide discounts in the future. But new car technology makes cars more costly for insurers to repair and replace, which raises rates.

Your Driving History Habits

If you've been in multiple accidents or rack up multiple traffic tickets, you'll pay more for car insurance than someone with a clean driving record. Insurance companies also tend to view new drivers as high risk.

The amount you drive matters too. A driver who has a long commute to work will probably pay more for insurance than someone who uses their vehicle only to run errands on weekends. More time behind the wheel means more exposure to risk.

Be honest about your mileage when you shop for insurance. When you file a claim, an adjuster will likely inspect your car, and the average annual mileage can be calculated using odometer readings. If the mileage calculation is significantly above a driver's reported mileage, the insurance company might deny your claim.

Personal or Business Auto Coverage

Commercial auto insurance is typically more expensive than personal insurance. Most personal auto insurance policies exclude driving for business purposes. If you fail to tell your insurer that you are driving your car for business purposes and you get into an accident, your insurer will likely deny your claim.

Credit History

Most states allow insurance companies to consider your credit score as a pricing factor. Insurers typically consider things like your current level of debt and past payment history, among other factors, to determine your rate. Drivers with poor credit scores are likely to pay higher premiums than drivers with good credit scores. This practice is controversial and banned in several states.

Learn about ways to rebuild your credit.

Demographic Factors

You can't control all of the factors that affect your premiums. Insurers make assumptions about risk based on demographic factors.


Younger, less experienced drivers often pay far more for car insurance than older drivers. Insurers consider drivers under 25 to be particularly high risk.


In most states, car insurance companies are allowed to consider your gender when setting rates. Young men typically pay more than young women for auto insurance, but prices tend to even out for older adults.

Insurers have found that teen boys and young men are more likely to get in car accidents than other people and they are more likely to buy sports cars, speed, or take other risks behind the wheel.

Where You Live

Where you live and where you park your car affect your premium. Local crime rates, weather patterns, and traffic levels can impact the amount drivers pay in premiums. People who live in cities tend to pay more than people who live in more rural areas.

Car Insurance Discounts

Insurance companies offer discounts to some drivers. These discounts ordinarily fit into three categories: merit-based, affiliation-based, and customer-service discounts.

Merit-Based Discounts

Insurance companies often give merit-based discounts to those who have a good driving history or have low annual mileage, for example. Some companies offer discounts for drivers who complete a defensive driving or driver training course. Merit-based discounts can also be based on non-driving behavior, like discounts for students who get good grades.

Affiliation-Based Discounts

Affiliation-based discounts are based on the driver being connected with a certain demographic or group. This kind of discount includes military discounts, senior citizen discounts, low-income discounts, and discounts based on membership in certain organizations, like AARP (called "affinity" discounts).

Customer-Service Discounts

Customer-service discounts are generally designed to reward customers for their business. Customers who insure multiple cars with the same company frequently receive a multi-car discount, as do customers who choose to carry other policies with the company, especially homeowners' insurance. (Purchasing two or more types of insurance with one company is called "bundling.")

Customers who remain with the same company for several years might qualify for loyalty discounts. Other customer-service discounts—like discounts when you agree to automatic payments, paperless statements, and early renewal—are used to encourage efficiency.

Drivers shouldn't wait for the insurance company to offer discounts. It's better to contact the insurance company to ask about discounts that might apply in your situation. Drivers should also consider membership in organizations that can pay for themselves through savings on car insurance premiums and other benefits.

The Bottom Line

Drivers can take steps to reduce their car insurance premiums. Buy a car that is affordable to insure, maintain a clean driving record, build a good credit score, and look into discounts. Some of these actions might take a little more time, such as improving your credit or changing your driving habits, while others provide an immediate benefit, such as asking about discounts and having the insurance company apply them to your policy.

More Information

To learn more about cars and driving, get Nolo's Encyclopedia of Everyday Law. You'll find information about buying a new car, insuring your car, and other legal questions that come up in your day-to-day life.

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