Know the factors affecting car insurance premiums and learn ways to help lower insurance costs.
Woman calling her insurance company to report vehicle damage.
You pay one amount for car insurance, your best friend pays another and your neighbor pays still another amount. What gives? Most insurance companies look at a number of key factors to calculate how much you’ll end up paying for your car insurance.
Take a closer look at these factors that affect your car insurance premium to clear things up — some of them also come with bonus suggestions for keeping costs down.
Factors that affect car insurance rates
Your policy and deductibles
When you are choosing your car insurance deductible and coverages, the specifics play a role in your monthly payment.
Generally, choosing a higher deductible means a lower monthly payment.
Choosing a lower deductible means a higher monthly payment.
Any additional coverage you add typically gives you added insurance protection, depending on the claim, but will also add to your monthly cost.
One way to lower insurance costs is to review your policy with your insurance agent and eliminate any coverage you may not need, such as comprehensive coverage on an older vehicle, rental reimbursement or emergency roadside service.
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What you drive
Car insurance providers often develop vehicle safety ratings by collecting a large amount of data from customer claims and analyzing industry safety reports. They may offer discounts to auto customers who drive safer vehicles. The opposite can apply for less safe rides.
Some insurers increase premiums for cars more susceptible to damage, occupant injury or theft, and they lower rates for those that fare better than the norm on those measures.
Driving vehicles that rate highly in terms of driver and passenger protection may mean savings on insurance.
So, before you head down to the dealership, do some research on the car you want to purchase. Does the vehicle that has caught your eye have strong safety ratings? Is this specific model often stolen? Knowing the answers to a few simple questions can go a long way toward keeping your rates low.
How often, and how far, you drive
People who use their car for business and drive more miles in a year pay more than those who drive less. The more miles you drive in a year, the higher the chances of a collision — regardless of how safe a driver you are.
To help offset how much you drive, consider joining a car or van pool, riding your bike or taking public transportation to work. Insurance rates may be lower if you drive fewer miles.
Check with your insurance company about a discount for driving less. Usage-based car insurance like Drive Safe & Save™ by State Farm® provides a personalized discount based on how the vehicle is driven and the miles driven by using telematics information from your car or smartphone.1
Where you live
Generally, due to higher rates of vandalism, theft and collisions, urban drivers pay more for car insurance than those in small towns or rural areas.
Your driving record
Drivers who cause accidents generally pay more than those who have gone accident-free for several years. If you’ve been accident-free for a long period of time, don’t get complacent. Remain cautious and maintain your good driving habits. If you are insured and accident-free for 3 years, you may qualify for a State Farm accident-free savings.
And even though you can’t rewrite your driving history, having an accident on your record can be an important reminder to always drive with caution and care. As time goes on, the effect of past accidents on your premiums will decrease.
Your credit history
Certain credit information can be predictive of future insurance claims. Where applicable, many insurance companies use credit history to help determine the cost of car insurance. Maintaining good credit may have a positive impact on your car insurance costs.
Your age, sex and marital status
Accident rates are often higher for drivers under age 25, especially single males. Car insurance prices in most states reflect these differences. If you’re a student, you might be in line for a discount. Most car insurers provide discounts to student drivers who maintain good grades.
What are ways to help lower car insurance premiums?
Dropping unnecessary coverage, increasing your deductible or reducing coverage limits may help lower insurance costs. Your insurance agent can share the pros and cons of these options.
In some states, younger drivers are also able to take driver safety courses like Steer Clear® by State Farm that could lower your premium. Overall, it doesn’t hurt — and might very well help.
You can also check with your insurance company to see if they have a telematics program, like Drive Safe & Save™ from State Farm.1 These usage-based car insurance programs record how you drive and the miles you drive. The safer a driver you are, the more you may lower your car insurance.
Other typical discounts include those for good students, children no longer driving while away at college, insuring multiple vehicles, installing anti-theft devices, taking defensive driving courses and accident-free driving. See your local agent for a full list of discounts.
Using one insurance company for multiple insurance policies can lower your total costs. Combining the purchase of an auto policy with the purchase of a home policy, sometimes called bundling, can save you money.
Finally, as always, it’s a good idea to talk to your State Farm agent about what policies are best for you and your situation.
Auto insurance for foreign drivers
Car insurance for foreign drivers
Well, you made it to the U.S. Welcome! Whether you’re here visiting or starting a brand new life, one of the first things that surely crossed your mind is being able to drive. Clearly, having a driver’s license will be the first step. But apart from having a license, and unlike in many other countries, in the U.S., you’re required to have auto insurance in order to drive, in most states. We’ve gathered helpful information to assist you. The road awaits. Let’s get started.
Driver’s licenses and car insurance for immigrants
Here in the U.S., everybody needs to have two things before they can drive: a driver’s license and, in most states, vehicle insurance. The rules for both of these are different depending on the state that you live in. Typically the DMV (Department of Motor Vehicles — which is in charge of issuing licenses, license plates and vehicle titles) requires that you have a social security number in order to get a license. However, don’t get too discouraged if you don’t have one. More and more states are able to help people obtain a driver’s license. Check the rules of the state that you live in to see if you’re eligible.
Can I purchase car insurance with an international driver’s license (IDP)?
Yes, it’s possible. Depending on the country you’re from and the state you’ll be driving in while in the U.S., you may be able to use your home country’s driver’s license. In addition, you can obtain an international driver’s license which will allow you to drive in the U.S. and many other countries. If driving on your country’s license, it may only be allowed for three months, where an IDP could allow up to one year.
There are cases where some insurance companies don’t insure foreign drivers. Most major companies, including State Farm®, do insure those that meet the state requirements.
Car insurance: Do I need to start from scratch?
When it comes to car insurance, everything depends on the coverage that you choose, although an insurance company might charge you a bit more at the beginning. It doesn’t matter if you have years of experience driving in another country. When you don’t have a driving history established in the U.S., you’re considered a “new driver.”
Who does car insurance help protect?
Have you ever wondered why it’s mandatory to have car insurance in order to drive here in the U.S.? While it may seem a bit of an exaggeration, every time a person drives they are exposing themselves to the risk of having an accident. If this were to happen to you and you didn’t have insurance, you might have to pay out-of-pocket not only for repairs, but also for medical expenses for both you and the other person. And you’ve probably found out by now just how much those kinds of things can cost here. In other words, your hard-earned savings could be spent up on a car accident. Liability insurance helps protect you and your family for damages you are at fault for up to the amount of policy limits you choose.
The minimum required… it’s not the same everywhere
Now, practically all of the states require that you have at least liability coverage, which generally pays for property damage and medical costs for injuries if you are considered at fault in an accident.
Liability coverage only covers expenses caused by you to others… and not your own. Some states have minimum coverage requirements. Coverage for your own medical expenses is called Personal Injury Protection (PIP), or Medical Payments Coverage (MPC). Which coverage is available to you depends on the state where you are seeking coverage. In certain states — like Michigan, Delaware, Florida, New York, Pennsylvania, etc. — it’s mandatory in addition to liability coverage. Even if you have PIP or MPC coverage, damage to your car is not covered in the event of an accident. You would need collision coverage for your car, which is not mandatory in any of the states. But you may want to consider this coverage in the event that you get in a car crash and don’t have the money to repair your car.
If you’d like to find out more on the topic, State Farm provides information on various types of coverage to assist you in making the right decisions.
Other minimum coverages
Aside from liability coverage (coverage for property damage and Bodily Injury to others) and PIP coverage, one or more additional coverages are required in states like New York, Kansas, Massachusetts, Minnesota and North Carolina, among others. The most important ones are uninsured motorist coverage and underinsured motorist coverage. With both, you have coverage in the event that you run into a problem with someone who doesn’t have insurance or whose coverage is so minimal that it doesn’t cover the resulting damages or medical costs.
What happens if I drive without insurance and I don’t get into an accident?
Ok, so suppose that none of this is convincing enough and you think you’ll be able to drive without having an accident. You could get stopped by the police for any other reason just the same and, if you’re driving without insurance, may have to pay fines ranging from $50 to several thousands of dollars. Even worse: If they catch you doing it more than once, you risk having your license and registration suspended or revoked.
In short, when it comes to insurance in the U.S., there’s a lot to learn. You don’t need to know it all, though. A State Farm agent can help explain often in the language that you speak. There are plenty of agents that are bilingual or that have bilingual staff — all of which are ready to lend a hand.
What if I’m vacationing from Canada?
If you have a Canadian driver’s license and insurance, you may drive in the United States while on vacation using your existing Canadian insurance coverage and driver’s license. If you are moving to the U.S. you’ll need to register your car at the DMV of your new home state and obtain insurance.
Why auto insurance rates are going up
Reasons behind rising car insurance premiums and ways to help manage them.
A man driving his car.
Everything seems to be getting more expensive lately, and auto insurance is no exception. Here are a few reasons why auto insurance rates are going up, along with what you can do to help manage your rates.
Some reasons for an auto insurance rate increase
Driving habits changed during COVID-19 and after
During the COVID-19 pandemic, federal and local governments enforced shelter-in-place and social distancing guidelines. We then saw fewer accidents and less expensive losses. After COVID-19, people returned to their pre-pandemic driving routines.
As a mutual insurance company, State Farm® has the flexibility to react to changes we experience, such as in 2020 when State Farm returned premium to auto customers during the beginning of the COVID-19 Pandemic. However, as loss severity continues to rise, auto insurance rates will increase.
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Rising car repair costs
Inflation, supply chain disruption and labor issues caused by the COVID-19 pandemic have impacted vehicle repair costs and, on occasion, how quickly you can get repairs completed. Additionally, new technology, such as parking sensors, lane-departure warnings, and better battery technology, particularly in electric vehicles, have added to the rising cost of repairs. While those smarter sensors and stronger devices can help improve safety, they are also more expensive to repair.
Increased accidents due to distracted driving
According to a State Farm survey, more than half of drivers said they read or send texts while driving, and 56% of drivers report using video chat or recording video. Even voice-activated car commands can divert cognitive abilities and attention. Rethink using the phone while driving, and avoid being tempted by other driving distractions. If you have a teen, be sure to talk with them about safe driving habits. Especially since teenagers make up a large portion of distracted drivers involved in fatal crashes.
Ways to manage the rate increase
A Personal Price Plan™ helps you create an affordable price (just for you).1 Check with your State Farm agent about possible ways to save on your bill.
Drive Safe & Save™ puts you in control of your premium by leveraging driving data to customize your own personal discount.2
Take advantage of other applicable discounts, such as Multiple Line Discount, Steer Clear® Safe Driver Discount for drivers under age 25 and the Good Student Discount.
Evaluate how increasing your deductible or decreasing coverage on older vehicles could reduce your monthly premium.