How Is My Auto Insurance Premium Calculated

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According to the Insurance Information Institute, the average American spent $1588 on car insurance in 2022. The averages change from year to year, but how insurance companies formulate the cost of your auto insurance premiums don’t fluctuate much.


Younger drivers are statistically more likely to get into accidents, according to the Colorado DMV, particularly those in the 16 to 19 age group. This means that, the older you get, the less you pay for car insurance premiums. Age also affects your credit score, which insurers use to provide quotes. A longer credit history means a better credit score, which translates to lower car insurance rates.

You will pay more for auto insurance if you have a teenage driver on your policy. This is especially true when he or she first receives a learning permit or license.

Driving Habits

How many accidents have you caused? How many traffic tickets have you received? How far do you drive to work? Where is your car stored when not in use? Your driving habits encompass all of these and more, and will impact the cost of your car insurance premiums. The more you drive, for example, the higher the risk.


Where you live is also an relate. Some states, such as New Jersey and Louisiana, have higher car insurance rates than others. You might pay less if you live in a less-populous county, and you might pay more if you live in a big metropolitan area.

Furthermore, your actual residence can alter the cost of your car insurance premiums. If you live in a single-family residence with a garage, your car is more protected than if you park in the lot at your apartment complex.


Some cars are just more expensive to insure than others. You will also pay more if you choose to buy higher levels of liability, comprehensive and collision coverage. Generally speaking, newer, more valuable cars are more expensive to insure than older, cheaper models.

Security Risks

If your car is equipped with security devices, such as alarm systems and anti-lock brakes, you will probably lower the cost of your car insurance premiums. Most insurers offer discounts if your vehicle is more secure, so it sometimes pays to install after-market security devices if your car is not equipped with them.


If your work is far from your home or if you utilize your vehicle in the course of your job, this will increase your car insurance premiums. For example, a pizza delivery driver might have to pay more than a high school teacher because the former uses his vehicle all day, and therefore presents a higher risk of an accident. However, depending on your occupation, your employer may provide you with insurance coverage for your vehicle when it is being used for the job, so be sure to discuss this with your insurance agent.

Pricing Auto Insurance Premiums

Even if you have significant risk factors for higher car insurance, you can unexcited lower your rates by being a safe driver and by taking advantage of discounts. Let your agent know that you are concerned about your premiums, and ask about any ways that you might be able to lower them.

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