how your car insurance rate is determined
Odds are you've been paying for car insurance for a while. Have you ever wondered how your insurer arrived at your specific premium? We'll demystify car insurance rates to give you a better understanding of why you pay what you pay.
The most important factors
In addition to the coverage options, limits, and deductibles you choose, certain elements outweigh others when it comes time to calculate your rate. In general, these categories influence your car insurance premium the most:
Your driving record
This one's the most obvious. Because your insurance policy is designed to offer protection in case you get into an accident, your insurer does its best to analyze the likelihood of an accident.
If you've been in 3 accidents in the past few weeks, for example, there's a higher chance of another one in the near future. Your driving record, also known as your Motor Vehicle Report (MVR), details past accidents and moving violations.
A good rule of thumb: the cleaner your driving record, the lower your premium.
Age, gender, and marital status
Age, in an insurer's eyes, is directly related to experience. The more experience you have behind the wheel, the less likely you are to cause an accident.
Another important factor is gender, specifically since statistics say males are more likely to be involved in an accident than females.
Marital status is also important. Statistics show that married drivers are less likely to crash than their single counterparts.
These factors can often be neutralized by a sterling individual driving record.
Where you live
Accidents are unexpected and often caused by factors outside of our control. If you live in an urban area that's densely packed with traffic and has a high theft rate, your premium could be higher than a rural-living counterpart's.
The less important, but still important, factors
These pricing elements can affect your rate to a lesser extent than your driving record:
The make and model of your car
If you drive a new model that scored highly in crash safety tests, you could be rewarded with lower rates than a driver who opted for the flashy new car that performed poorly on the same tests. And if you add comprehensive and collision coverage to your policy, you'll be insured up to its actual cash value, or ACV, in the event it's stolen or declared a total loss. The less valuable the car, the less you can expect to pay for these coverages.
Your credit-based insurance score
This is not a factor in all states, but it remains a consideration in the majority of the country. Statistics show that drivers with better insurance scores are less likely to get into car accidents.
How you use the car
Do you use your car to commute through heavy traffic twice a day? Or is it just for Sunday drives? How you intend to use the car can influence what you pay for insurance.
Prior insurance history
Drivers who haven't had a gap in coverage are statistically less likely to get into a car accident.
How pricing varies by state
Each state operates differently. One state's department of insurance may ban insurers from using a rating factor while another state may permit it. California, for example, bans the use of credit scores and makes a driver's location a secondary rating factor, not a primary one.
You can get a better idea of your state's rating factors here in our state-specific guides to car insurance.
How pricing varies by insurer
One more good reason to shop around: each insurer bases its rates, in part, on its own claim history and set of data. The formula that's used to calculate your rate will differ between insurers, and that can work to your advantage when you compare policies side by side.
Accurately and fairly pricing a policy is key to an insurer's livelihood. If a policy is priced too high, a shopper isn't likely to buy it and become a customer. If it's priced too low, the insurer risks its financial stability in the event of a claim. Finding the magic middle ground is a priority for most insurers.
Esurance understands that another company may have a pricing formula that offers a better match for your needs. That's why we make it easy to comparison shop once you get your quote.
If you're ready to shop, you can start your car insurance quote anytime or give us a call at 1-800-ESURANCE (1-800-378-7262). We'll walk you through your options and help you find a policy that fits.
Car insurance discounts
Qualifying for discounts is a great way to bring your premium down. Find out about some of the discounts we offer here.
Esurance Coverage Counselor®
Spend a few minutes with our handy online counselor for a personalized policy recommendation.