Insurance companies closely examine many aspects of your life in order to determine what they will charge you for auto coverage.
They do this because they want to make sure they charge policyholders enough money to cover the cost of claims.
For example, if you have a long history of having car accidents, you’re likely to pay more than someone who has never had a collision.
"This is an effort to create a fair rate for each driver and not ask any driver to subsidize others who have higher risks," says Karl Newman, president of the Seattle-based Northwest Insurance Council, an insurance industry trade group.
If all drivers were charged a flat rate, low-risk drivers would end up shouldering costs that should be borne by the people who are most likely to have accidents, he explains.
Many of the factors that are used are within your control, however. Here are five factors commonly used to determine auto insurance rates.
1. Your driving record.
One of the factors you have the most control over is your driving record.
If you manage to keep your record spotless, with no accidents or traffic tickets, your premium will be much lower than drivers who have frequent accidents and run-ins with law enforcement, says New Jersey insurance agent Kevin Foley.
While insurers understand that few drivers have perfect records, there are traffic violations that are guaranteed to result in higher rates.
For example, insurers view DUI convictions as red flags, since people who drive while under the influence of alcohol are likely to cause accidents. In some cases, insurers may refuse to insure such drivers, Foley says.
In March 2014, an insuranceQuotes.com study found that car insurance premiums can rise by as much 93 percent after just one moving violation.
2. Your credit history.
Newman says many carriers consider your credit history when setting rates. According to the United Policyholders consumer group, California, Hawaii and Massachusetts are the only states that don't permit carriers to use credit scores as a factor in setting auto insurance rates.
You can improve your score by paying your bills on time and keeping your card account balances low. It's also good to monitor what credit reporting companies are saying about you so you can correct any errors.
The time it takes to repair a bad credit history depends on how serious your financial problems are, Newman says. "It can take several years to earn back a good insurance score."
You have the right to obtain a free copy of your credit reports every year. The largest reporting companies are Equifax, Experian and TransUnion. You can obtain credit reports through AnnualCreditReport.com. Another resource is Credit Karma, a free credit monitoring company.
3. The type of car you drive.
If you choose to drive an expensive car, it will boost your car insurance rates, Foley says. That's because the more expensive the car, the costlier it typically is to repair or to replace.
Insurance companies also examine the safety record of the model of car you drive. Models with advanced safety equipment, such as sensors that can apply the brakes before you hit another vehicle or object, may earn you premium discounts.
The size of your car also can be a factor in setting rates, Newman says. Because large SUVs often inflict serious damage on smaller vehicles in collisions, some insurers may charge their owners more for liability insurance.
4. Your address.
Where you live can affect the cost of your insurance. Due to higher rates of vandalism, theft and accidents, drivers who live in congested urban areas typically pay higher auto insurance prices than those who live in small towns and rural areas, says Mary Bonelli, a spokeswoman for the Ohio Insurance Institute.
You may be able to control this by changing your address.
Consumer groups, such as the Consumer Federation of America, have opposed the practice of using location to determine insurance rates. They say this puts low-income drivers at an unfair disadvantage.
5. How much you drive.
The more you drive each year, the greater the opportunity you'll have to become involved in a traffic collision. That's why drivers with long daily work commutes typically pay more for car insurance than people who work at home and only drive on the weekends. After you buy a policy, your insurer will ask you to report your mileage each year.
There also are many low-mileage insurance options for consumers. These often are called pay-as-you-drive (PAYD) programs.
According to the nonprofit Insurance Information Institute, PAYD auto insurance gives drivers an incentive to drive less and more cautiously. PAYD programs range from simple mileage-based programs to telematics, in which monitoring devices are placed in cars to provide insurance companies with information about driving behaviors, such as how fast you drive and how hard you brake. The goal is to give price breaks to cautious drivers who travel fewer miles.
One way to reduce your driving is to join a carpool in which you and other participants take turns driving to work.