Key Factors That Affect Your Car Insurance Premium

words Al Woods

car insure tips

There are many factors that insurance companies take into account when calculating premiums and this can be confusing for new policyholders.

The premium amount can differ from driver to driver and also vary according to the place you reside in. 

Being aware of the different factors can help you calculate car insurance premiums to fit your budget.

Do your research if you are a first-time insurance buyer to get the necessary coverage at nominal insurance rates.

Make & Model Of Your Car

The insurance premiums for a more expensive car like a luxury car will be higher than a standard car.

Your car’s retail price will play a significant role when insurance carriers set rates. They will also look at previous claims from similar models to evaluate repair costs and other expenses.

The vehicle size is also taken into account since large and heavy vehicles have the potential to cause more damage which in turn translates to higher premiums.

Size Of The Engine

The type, cubic capacity and size of your car engine play a role in deciding your car insurance premiums. 

Vehicles which have engines with high horsepower are often more expensive to insure since insurers consider the speed factor as a risk.

If your car engine runs on diesel, the insurance rates will be higher.


The place you live also plays a role in determining your car insurance rates.

For example, cities that are densely populated have higher insurance rates than the countryside.

This is why states like Vermont have the lowest car insurance rates and states like Florida have some of the highest car insurance rates.


If you have chosen a voluntary deductible option where you pay a fixed amount of money whenever you make a claim, your insurance premiums will be lower.

This is because, in case of an accident, the insurance company will have to pay less money while covering for you.

Type Of Coverage

Insurance plans which provide more benefits and coverage will cost you higher premiums than plans which have less coverage.

For example, comprehensive car insurance coverage comes at a higher premium as compared to liability coverage.

Driving History 

If you don’t have a great driving record which includes many traffic violations and speeding tickets, you will have difficulty finding insurance or you will be required to pay higher insurance premiums.

You might also have to get non-standard car insurance designed for drivers with bad driving history.

The good news is that you can work on improving your driving history which in turn will lower your insurance rates.

No Claim Bonus

Insurance holders who haven’t raised a claim during their previous policy period can receive certain discounts on their insurance premiums.


The more young and inexperienced you are, the higher your insurance premiums will be. 

This is because young people for example between ages 16-19 are more likely to be involved in car accidents.

Anti-Theft Devices

Installing anti-theft devices on your car will fetch you lower insurance premiums.

This is because you will be considered more responsible by your insurance company.


People who are members of certified Automobile Associations can receive certain discounts on their insurance premiums.


Insurance add-ons like zero depreciation cover and engine protection cover provide extra protection to the policyholder.

If you opt for a lot of add-ons, your insurance premiums will be higher.

Digital Insurance

Digital insurance typically costs less than standard insurance since it requires less operational costs.

You can also benefit from comparing different kinds of insurance to see which one fits your budget the best.


Tools like car insurance calculators can help you calculate an accurate premium amount depending upon your coverage and add-ons. 

Improving your driving record and refraining from making invalid claims are a few things you can do to maintain moderate insurance rates.

With a better understanding of the factors that influence your car insurance premium rates, you can save money by avoiding higher premiums.


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