When it comes to car insurance, there are several variables that affect how much coverage you need and how much it will cost you.

Whether you lease, finance, or own a vehicle, it’s the law that you must have a car insurance policy. However, there are several variables that affect how much insurance coverage you need and how much it will cost you.

Take a look at how auto insurance rates are calculated so you can pick the best coverage for your needs and budget.

The Vehicle

The cost of car insurance is heavily based on the make, model, and age of your vehicle. That’s why a brand new sports car will have a much higher premium than a 10-year-old car, and an SUV will usually cost more than a sedan.

Safety features can also qualify you for discounts, which means a newer car that comes loaded with things like airbags, automatic seat belts, and anti-lock brakes might lower the cost a bit.

Driving Record

Auto insurance carriers offer the best rates to drivers who have a strong track record of safe driving. That’s not to say you’re doomed if you’ve been in a fender bender. But if you have points on your license because of moving violations, for example, you can expect to pay a higher premium. On the other hand, if you’ve taken a defensive driving course, that could give you a discount.


Car insurance carriers are allowed to “discriminate” against groups of people based on age and gender. That’s why young male drivers’ rates are typically higher than older females—the risk of their involvement in an accident is greater. That being said, over time, a good driving record will even the playing field, and age and gender won’t play much of a role.

Credit History

While it may come as a surprise to many consumers, your credit score can actually have an impact on your car insurance rates. Like most lenders and financial companies, auto insurance companies want to feel confident that you will pay your bills on time. Therefore, those with strong credit histories will qualify for better rates.


Another factor affecting the price of auto insurance is where you live. It makes sense if you’re in an urban area doing a lot of traffic-heavy city driving, the chances are greater that you may be involved in a collision. The risk of theft or vandalism can also increase if you live in a city.

Coverage Options

While you can’t control all of the factors listed above, you do have some choice as far as how much auto coverage you need. If you’re leasing or financing, there will be certain minimum requirements, for instance, you’ll have to carry collision coverage. But you can opt out of certain extras if you own a car outright, or opt for a lower premium plan but accept a higher deductible.

As with any financial decision, the key is not to choose your insurance without doing your homework. Shop around and get quotes from a couple of insurers to see which one is a good fit for you.

Dawn Papandrea

About the AuthorDawn Papandrea

With more than 15 years of professional writing and editing experience, my writing specialties are in personal finance, higher education, and content marketing. Publishing credits include Family Circle, Parents, WomansDay.com, CreditCards.com, BankRate.com, University Business, and many more. In addition, I also create branded content for several brands and corporations in the financial, retail, marketing, and lifestyle/parenting spaces. No matter the medium, I understands the value and power of content from both a writer's and editor's perspective.