How Do Car Insurance Companies Decide What To Charge?

Insurance companies use a process called underwriting to decide whether to sell you a policy and how much to charge you. The amount you pay for insurance is called a premium.

Most companies consider these things when deciding your auto insurance premium:

Your age. Men under 25 and women under 21 usually have the highest rates. Rates go down as people reach middle age, but they go up again after age 70.

Your driving record and claims history. Insurance companies will charge you more if you’ve had accidents or gotten tickets. Some companies might refuse to sell you a policy.

Where you keep your car. Rates are higher if you live in a city. This is because people in cities are more likely to have accidents or have their cars stolen than people in rural areas. Rates can also vary between ZIP codes in the same city.

The kind of car you have. Collision and comprehensive rates are highest for luxury, high-performance, and sports cars. Rates are also higher for cars that cost more to repair.

How you use your car. Your rates will be higher if you drive your car to and from work or use it for business.

Your credit score. Some companies use your credit score to decide what to charge you.