How Are Motor Vehicle Insurance Rates Determined

Ever wonder why your auto insurance premium seems so high? The truth is, insurance companies don’t just pull those numbers out of thin air. They use complex algorithms and tons of data to determine how much you’ll pay for monthly coverage.

You may not realize it, but everything from your age and address to your credit score and the type of car you drive affects your rate. While you can’t control all the factors, understanding how insurance companies calculate your premium can help you make smart choices to keep costs down.

Keep reading to learn the main factors determining how much you pay for car insurance each month and the steps you can take to lower your rate.

Your Driving History and Claims Record

Your driving history and claims record play a big role in determining your insurance rates. Insurance companies will look at the following:

  • The number of accidents and claims you’ve had. More accidents and claims mean higher risk to the insurer, so your rates will likely increase. Even not-at-fault accidents can sometimes impact your rates.
  • Traffic violations include speeding tickets, red lights or stop signs, etc. Too many violations show risky driving behavior and can drive your premiums up. Minor violations may have a smaller impact, but major offenses like reckless driving can hurt your rates.
  • How long you’ve been driving. Newer drivers, especially teens, are considered a higher risk, so you can expect to pay more for insurance. Rates typically decrease over time as you gain more experience.
  • Your annual mileage. The more you drive, the more opportunity for accidents, so higher mileage means higher rates. Provide an accurate estimate of your yearly mileage to get the best rates.
  • Where you live. Rates vary in different areas based on traffic density, accident rates, crime rates, and weather conditions. Urban areas usually have higher rates than rural or suburban neighborhoods.

Keeping a clean driving record, limiting mileage when possible, and comparing rates from different companies in your area are some of the best ways to get the most affordable insurance for your needs. Over time, maintaining a safe driving history will be rewarded with lower premiums.

The Type of Vehicle You Drive

The type of vehicle you drive is one of the biggest factors that determines your insurance rate. If you drive a sports car or luxury vehicle, you’ll generally pay higher premiums. Why? Because those vehicles typically cost more to repair or replace in an accident.

On the other hand, if you drive an economy or mid-size sedan, your rates will likely be lower. These vehicles are more affordable to insure because parts and labor costs are lower if they sustain damage. Some insurance companies even offer discounts for driving a hybrid or electric vehicle since those are viewed as more environmentally friendly.

Your vehicle’s safety rating and anti-theft features also affect your premium amount. Insurers view safer cars with high safety ratings and modern anti-theft systems like alarm systems or GPS tracking as lower risk, so they usually qualify for lower rates. Vehicles with a solid safety record and lots of airbags or advanced driver assistance systems like emergency braking are rewarded with discounts from many companies.

The age and mileage of your vehicle matter as well. Brand-new cars often cost more to insure initially, but rates usually decrease over time as the vehicle depreciates. However, rates start back up for vehicles over 5-7 years old or with over 75,000 miles. Older, higher-mileage vehicles are more prone to breakdowns and accidents, making them riskier and more expensive to insure.

Your Credit Score and Report

Your credit score and credit report play a significant role in determining your auto insurance rates. Insurance companies view people with good credit as less risky to insure since they are more likely to pay premiums on time.

Check Your Credit Report

You’re entitled to one free credit report each year from Review it to ensure there are no errors before shopping for car insurance. Dispute any mistakes with the credit bureaus to get them corrected. The higher your score, the lower your premiums.

  • Pay all bills on time. Payment history is the biggest factor in your score. Set up automatic payments or payment reminders.
  • Lower your credit card balances. Keep balances low relative to your limits. High balances hurt your score the most.
  • Limit new applications. Applying for a lot of new credit in a short period can lower your score. Only apply for new credit when needed.
  • Check your score. You can get free scores and reports from CreditKarma, Credit Sesame or your credit card issuer. Aim for a score of 700 or higher.

Ask About Discounts

Some insurers offer discounts for good credit, often 10% or more off your premium. When shopping for coverage, ask agents and companies if they offer a credit score discount and how much you may save. Compare quotes from companies offering this discount to lower your rate.

Where You Live – Location and Commute

Where you live and how much you commute can significantly impact your auto insurance rates. Insurance companies consider these factors when determining your premiums.


The area where you garage your vehicle each night can affect your rates. If you live in a city with high crime rates, your premiums may be higher due to the increased risk of theft or vandalism. Rural areas often have lower rates. Your specific neighborhood and address are also considered.

  • Living in a “bad” part of town may increase your rates. Insurance companies analyze crime statistics by zip code and sometimes even by street.
  • Rural residents usually pay less since accidents or theft are less likely. Less traffic and fewer risks mean lower premiums.


The length and purpose of your daily commute are also rated factors. If you have a long commute, especially in heavy traffic, you have a higher chance of an accident, so your rates may increase.

  • Long commutes, especially in congested traffic, increase the likelihood of an accident. More time on the road means more opportunities for collisions.
  • Using your vehicle for business purposes, like meeting with clients or making deliveries, also adds to your time on the road and the subsequent risk of an accident. Your rates may be higher as a result.

Where you live and how much you drive are important considerations for insurance companies when calculating your premiums. While you can’t change these factors easily, you may be able to lower your rates in other ways, such as bundling multiple policies, increasing your deductibles or improving your credit score. Every little bit helps when it comes to saving money on your auto insurance.

Contact Frankl Kominsky, Boynton Beach Car Accident Lawyer 

Dealing with insurance companies after an accident can be frustrating, especially in Boca Raton, Florida. They may try to get you to accept a low settlement or deny your claim. As your advocates, we handle communications with insurance companies and work to build a strong case to support the full value of your claim. We have a proven track record of achieving favorable client settlements and verdicts.

If you’ve been in a car accident, call Frankl Kominsky, a car accident lawyer serving Boca Raton, today at (561) 800-8000. We offer free case evaluations and charge no upfront fees. Our experienced attorneys can help you pursue compensation for medical bills, lost wages, pain and suffering, and other damages.

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