How Are Car Insurance Rates Calculated?

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What are the Most Important ‘Risk Factors’ Impacting Car Insurance Rates?

What are the Most Important ‘Risk Factors’ Impacting Car Insurance Rates?

Jun 1, 2023

Car insurance companies typically determine a driver’s rate based on risk. Insurance companies want to make money and will try to estimate the likelihood of you filing a claim for any type of car accident – whether or not you’re actually at fault. Your car insurance will be cheaper on a monthly and annual basis if you have a lower projected risk.

How Are Car Insurance Rates Calculated?

To estimate the potential risk of a driver, auto insurance companies consider many factors. Although not all insurance companies use every one, we’ll look at the top factors that determine auto insurance rates in the sections below.

What are Car Insurance Risk Factors?

Auto insurance companies use a variety of pricing factors to estimate the risk posed by a driver (also known as rating factors). However, not all car insurance companies use the same pricing factors, and individual companies will often place different weights on the same factor.

Some of the most commonly used car insurance risk factors include:

  • Driving Record: Your driving record plays an important role in determining the insurance rates you’ll pay. You may be eligible for lower insurance rates if you have an accident-free history. Conversely, a history of accidents, speeding citations, or DUI convictions may lead to much higher rates.
  • Location: Living in California is expensive on a number of levels – including car insurance rates for certain zip codes. If auto insurance companies consider your location when determining pricing, they’re typically looking at whether the zip code is more likely to be prone to crime (such vandalism and theft) as well as certain climate conditions (such a floods or fires).
  • Annual Mileage: The more you drive, the more likely you are to be in a car accident. Unfortunately for Californians, commuting is often essential for both work and leisure.
  • Coverage and Deductibles: Your insurance rate can be affected by the amount of deductible and the level of coverage that you select. Higher premiums are usually associated with higher coverage limits or lower deductibles.
  • Vehicle Type: Insurance rates can be affected by the make, model, and year of your car. For cars with higher values, greater repair costs, or more accidents or thefts, you’re likely to pay a great deal more on monthly premiums.
  • Age and Gender: Auto insurance rates are typically highest for men when they are young, while rates for women tend to rise as they age. California is one of the few states that actually prohibits gender-based pricing or requires unisex estimates when determining auto insurance premiums. The full list of such states includes:
    1. California
    2. Hawaii
    3. Massachusetts
    4. Michigan
    5. Montana
    6. North Carolina
    7. Pennsylvania
  • Marital Status: Most auto insurance companies offer lower rates to married drivers compared to single drivers. Consumer Federation of America reports that even divorced or widowed drivers will pay higher premiums for auto insurance than their married driver counterparts.
  • Previous Claims History: Your insurance rates could be higher if you have filed insurance claims in the past, particularly for accidents where you were at fault. Insurance companies might view people with past claims as greater risks.
  • Occupation/Education: Although many states have tried to ban the practice, auto insurance companies continue to offer illegal discounts to drivers who have college degrees and white-collar jobs. Consumer Watchdog notes that the following auto insurance companies have been known to use a driver’s education level as a pricing factor:
    1. Allstate
    2. GEICO
    3. Farmers
    4. Progressive
    5. AAA National
    6. Liberty Mutual
    7. Mercury
  • Credit History: Your credit score actually has a direct impact on the cost of your auto insurance. Drivers with lower credit scores have a higher likelihood of filing auto insurance claims, and the claims of bad credit drivers can be much more costly than those of good credit drivers. According to some studies, the difference between car insurance rates for drivers with low credit scores and those with high credit scores is more than $1500 per year (equivalent to a $784 premium increase on a 6-month policy).
  • Years of Driving Experience: The longer you practice a task, the more proficient you typically become at it. This is a mantra used by auto insurance companies who believe the more time you spend behind the wheel, the less likely it is that you will make an error that can lead to filing a claim.

    The Top 10 Factors That Can Affect Your Car Insurance Rates

    Do Car Insurance Rates Increase After Accidents?

    Fortunately, California is only one of two states (the other being Oklahoma) that does not allow auto insurance companies to increase rates following a car accident where the individual was not at fault. This includes drivers who are involved in hit and run accidents. However, some car insurance companies are known to neglect to apply this statewide rule when drivers are involved in accidents. Accordingly, if you’ve been in a car accident that was not your fault, be sure to confirm that your rates do not increase immediately afterward.

    Do I Need a Car Accident Injury Lawyer?

    In short: yes. Rather than taking on an insurance company alone, it is in your best interest to at least first consult with an experienced Los Angeles-area car accident injury attorney from Dordulian Law Group (DLG). We’ll review the facts of your case and offer you a blueprint for how to recover the maximum cash settlement you deserve. But don’t just take our word for it. The data is clear.

    A study conducted by the Insurance Research Council confirmed the following statistics for personal injury claims handled by private attorneys:

    • When injured claimants have private legal representation, their settlements are 40% higher.
    • When compared with those who represented themselves, the average insurance payout for injured victims who hired private attorneys was 3.5x higher.
    • The victims who are represented by private attorneys receive 85% of the money that insurance companies pay for bodily injury.

    Ready to file a claim and pursue justice through a financial damages award? Our expert attorneys are available online or by phone now.

    To speak with a DLG car accident lawyer for a free consultation, contact us today at 866-GO-SEE-SAM. We’ve helped injured car accident victims like you obtain more than $100,000,000.00 in settlements while maintaining a 98% winning record. When you’re injured in a California car accident, don’t settle for less than the DLG Advantage.

Go See Sam