Jun 22, 2021
Depending on where you live, the daunting process of shopping for car insurance can leave you with more questions than answers. How can one online search for standard car insurance turn up so many different quotes? Why is one company so much higher than the other when you’re providing the exact same information?
Below we’ll look at how car insurance rates are calculated and what steps you can take to reduce your monthly premiums. Additionally, we’ll discuss how to properly file a personal injury lawsuit after a car accident and recover the financial compensation you deserve without being taken advantage of by auto insurance companies.
Auto insurance companies calculate a driver’s rates based on risk. Insurance companies are in the business of making money, and they want to first try to predict the likelihood that you’ll file a claim. The lower your projected risk, the lower your car insurance rates will likely be on a monthly or annual basis.
To estimate a driver’s risk, auto insurance companies apply various pricing factors (also referred to as rating factors). We’ll discuss those pricing factors below in a moment, but before doing so it’s important to keep in mind that not all insurance companies use the same pricing factors (nor do they weigh them equally).
In other words, while one auto insurance company – say Geico – might use a driver’s age as the most heavily weighted factor in determining overall risk (and the ultimate rate paid by a driver), another company – say Progressive – might use a driver’s previous record as the most important factor.
The unfortunate fact is, it’s hard for the average driver to know which factors each auto insurance company weighs most heavily. Some auto insurance comparison websites like The Zebra offer a glimpse into the associated costs for individual pricing factors (and how those vary with each auto insurance company). But calculating all those costs to determine the best rate can be time quite consuming, leaving many drivers discouraged by the search process.
Auto insurance companies take many factors into consideration to estimate a driver’s potential risk. And, again, that level of risk is what determines the actual insurance premium a driver pays. While all insurance companies might not use each factor in their calculation process, below are the most common factors used to determine auto insurance rates.
1. A Driver’s Age
Age is an important pricing factor for almost every auto insurance company, and it has the greatest impact on young drivers. The Zebra reported that between most expensive insurance premiums – those paid by teen drivers – and the most affordable premiums – those paid by 50-year-olds – a cost gap of over $5,500 per year was found. Based on data that indicates young drivers are more prone to reckless and distracted driving (including texting or using a smartphone in any capacity), insurance companies view teens as extremely risky and therefore expensive clients to insure.
After age 20, if you’ve previously maintained a clean driving record, your auto insurance rates should start to decline (with an even more substantial decrease after age 25). Drivers in their mid-50s through early 70s who’ve maintained clean driving records are most likely to secure the lowest available insurance premiums based on the age pricing factor.
2. A Driver’s Gender
This may seem like a pricing factor that should have been done away with in the 1950s, but it turns out that in most states auto insurance companies can charge different rates for male and female drivers. How does this translate into the ultimate premium paid by a driver?
For men, auto insurance rates are traditionally higher when they’re young. Conversely, for women, auto insurance rates actually tend to be higher when they’re older.
California is actually one of the states that bans the use of gender pricing (or requires unisex pricing) in determining auto insurance rates. The full list of such states includes:
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3. A Driver’s History
Car insurance companies view your past driving record as a pretty clear indication of whether or not you’ll be filing a claim in the near future. Accordingly, a history of tickets, citations, violations, etc. will increase your auto insurance rates. The Zebra provided the following graph demonstrating how three traffic violations – a speeding ticket, a DUI, and a reckless driving citation – can impact a driver’s insurance premium depending on which auto insurance carrier they use.
4. A Driver’s Marital Status
Again, this may seem like something that should have no bearing on the amount of money you pay each month for auto insurance. However, most auto insurance companies actually have lower rates for married drivers than for those who are single. According to the Consumer Federation of America, even separated, divorced, or widowed drivers stand to incur higher auto insurance premiums than married drivers.
5. A Driver’s Credit Score
While you may not realize it, your credit score can actually have a significant impact on your auto insurance premiums. It turns out, drivers with poor credit scores are more likely to file auto insurance claims than drivers with better credit. Moreover, claims filed by bad credit drivers are often much more expensive than those filed by good credit drivers. The Zebra reported that the difference in car insurance rates between drivers with the lowest level of credit versus the highest level of credit is over $1,500 annually (equaling a whopping $784 increase for a six-month policy).
The Zebra provided the following graph demonstrating the differences in premiums by company based on the driver’s credit as a pricing factor.
However, in some states the practice of using a driver’s credit as a pricing factor is actually prohibited. California happens to be one of those states that disallows the practice of “credit-based insurance scores.” The full list of such states includes:
6. A Driver’s Education
While it may not seem like an equitable policy, drivers with college degrees generally pay less for car insurance. Newdwallet.com reported that highly educated people tend to file fewer auto insurance claims. In October 2020, Yahoo! reported that many states have tried to ban the practice of using education levels in setting auto insurance prices, but all were unsuccessful.
California passed Proposition 103 in 1988, which technically requires auto insurance prices to be based primarily on how a person drives. Auto insurance carriers are allowed to consider driving record, miles driven annually, and years of driving experience when determining premiums. Additionally, California Proposition 103 allowed groups of consumers to band together and negotiate discounts for their members.
But despite the passage of Proposition 103, for decades auto insurance companies have continued to illegally subsidize discounts for drivers with college degrees (thereby forcing other drivers to pay more).
According to Consumer Watchdog, the following auto insurance companies use a driver’s education level as a pricing factor.
As Nerdwallet.com reports, using a driver’s education level as a pricing factor has come under fire from the public in recent years, and some auto insurance companies are moving away from the practice.
7. A Driver’s Years of Experience Behind the Wheel
It’s a straightforward concept – the longer you’ve been doing something, the better you are at that particular act. It’s essentially a mantra for auto insurance companies who believe that the longer you’ve been behind the wheel the less likely you are to make a mistake that could result in a claim being filed.
It’s a simple fact for all drivers – those with many years of experience have the luxury of lower auto insurance premiums when compared to those with less experience.
8. A Driver’s Address
Ever moved from one part of the country to another and noticed your auto insurance rates either increased or decreased (sometimes dramatically)? That’s certainly not uncommon. Where you live is one of the most important pricing factors used by auto insurance companies. Accordingly, premiums can vary dramatically by state – with each having different regulations.
Nerdwallet.com reported that Michigan and Louisiana are the states with the highest auto insurance premiums, while Ohio and Maine are known to have some of the lowest. Michigan is a no-fault state, which means drivers are required to carry unlimited Personal Injury Protection (PIP). The discrepancy among auto insurance rates can be so significant from state-to-state that drivers in Michigan and Louisiana often pay more than twice the average rates when compared with Ohio and Maine drivers (equaling more than $2,000 annually).
When auto insurance companies use location as a pricing factor, they’re considering whether the driver’s zip code is more prone to crimes (such as vandalism and theft) as well as certain weather conditions (such as floods or wildfires).
9. A Driver’s Occupation
This is yet another pricing factor that has been heavily scrutinized by the public, with many believing it discriminates against certain occupations. CarInsuranceComparison.com reported that business owners tend to be the most expensive occupation to insure. The website indicated that while the lowest auto insurance premiums are paid by scientists – at an annual rate of $870 – the highest auto insurance premiums are paid by business owners (at $1400), followed by business executives (at $1375), and those in the judicial sector (judges and attorneys) at $1370 on average.
CarInsuranceComparison.com cited stress at work as one of the major factors in auto insurance companies increasing premiums for certain occupations.
Overall, occupations with low insurance premiums tend to have several factors in common:
Conversely, those with higher insurance premiums tend to fall into the following categories:
10. A Driver’s Annual Miles
The more miles you drive, the more likely you’ll be involved in an accident on one of our nation’s busy roads or highways. That, at least according to the auto insurance companies, is a true statement. Moreover, the number of miles you drive should, according to auto insurance companies, impact your rates.
California, in particular, is a state where a driver’s number of annual miles can directly impact his or her car insurance premiums. According to The Zebra, the national difference in annual premiums for drivers who travel less than 7,500 miles per year versus those who drive 15,000 miles or more annually is $92. However, in California, this difference is nearly 32% (which equates to approximately $557 per year).
In other words, a California driver who records less than 7,500 on their odometer pays more than $500 less per year on auto insurance than a driver who records 15,000 or more miles. That’s a pretty substantial discrepancy. But given the number of motor vehicle accidents that occur annually in California (and the correlating likelihood of being in an accident when you drive thousands of additional miles), charging drivers a premium makes financial sense from the perspective of an auto insurance company.
In terms of how auto insurance premiums vary by company based on the annual miles driven pricing factor, The Zebra provided the following graph.
Increasing insurance premiums are a universal fear experienced by drivers. According to WalletHub.com, drivers who are not at fault in car accidents generally see their auto insurance rates increase by 12%. That’s a pretty heavy toll to pay for someone’s else’s negligence or error.
Fortunately, California is one of two states – the other being Oklahoma – that do not allow auto insurance companies to raise rates after a not-at-fault car accident. That includes drivers involved in hit-and-run car accidents.
As we noted in a previous blog, as long as you make your hit-and-run claim to the insurance company within a “reasonable time” of the accident, the carrier may not raise your rates. That said, it’s always possible that your insurance company might “forget” to note that the car accident was not your fault or that you were involved in a hit-and-run. This is one of many reasons contacting an experienced and dedicated attorney immediately after receiving any necessary medical care is recommended for car accident victims.
At Dordulian Law Group (DLG), two of our Car Accident Division attorneys previously worked as defense counsel for major auto insurance corporations. Now, those two attorneys fight for our injured clients, using their insider knowledge and experience to ensure injured victims are never taken advantage of (i.e. having their rates raised in not-at-fault car accidents).
After a car accident, you could be left with mounting medical bills, pain and suffering, lost wages, and more. Those losses should not be your responsibility, but that of the at-fault driver who caused the crash – whether due to negligence or simple human error.
By filing a personal injury claim with a DLG attorney by your side, you can pursue financial compensation for all applicable economic and non-economic losses. Don’t accept a quick settlement from the insurance company without first completing a free consultation with one of our proven and experienced car accident lawyers.
We’ll listen to the facts of your case, launch a thorough investigation, get you acclimated with all the DLG team members who will serve as your legal support network, and develop a winning strategy based on our decades of experience and past success. With DLG, you never have to worry about being left with anything less than a maximum financial damages award following a car accident injury.
Our founder and president, Sam Dordulian, previously served as Deputy District Attorney for Los Angeles County. In that role, Dordulian garnered over 100 jury trial victories – a rare feat, particularly among personal injury lawyers.
Now, Dordulian fights on behalf of injured car accident victims, helping them get back on their feet and collect the maximum financial damages award they deserve to ensure a full recovery is made – physically, emotionally, and financially.
With a 98% success rate and history of recovering over $100,000,000 in settlements and verdicts for our clients, DLG is the absolute best choice for an injured car accident victim. When searching for a qualified and experienced attorney in California, there’s no substitute for the many advantages offered by DLG.
Contact us today online or by phone at 818-322-4056 to learn more about how we can help you win your car accident case and recover a maximum settlement that will allow you to recover and move forward on your own terms.
Our law firm in Glendale, CA advocates for victims of sexual assault, injury, employment disputes, and personal injury concerns.