How insurance companies decide what it will cost to cover your car

Car insurance.

It’s one of the major costs in operating a vehicle.

On average, Americans this year are paying $1,311 for a full-coverage policy, according to, about $109 per month. But those figures can be a misleading.

The range actually runs from $808 a year in Maine to a “budget-busting” $2,738 in Michigan. Pennsylvania at $1,305 is the state closest to the national average.

“Insurance rates are influenced by a number of different factors,” said “Everything from traffic, crime rates, state and local laws, the percentage of uninsured drivers, as well as the number of insurance companies competing in a market can all result in higher, or, if you’re lucky, lower premiums.”

Some factors – such as driving habits or the level of coverage you choose – can be easy to change. Others, like your driving history and where you live, not so much.

In fact, there are seven major cost factors, says The Simple Dollar website and blog.

Those factors are basic demographics (age, sex, marital status and location); the car you drive (compact, mid-size, performance); your driving history (tickets, accidents); your credit score (poor, fair, good, excellent); your driving habits (how much you drive your car, where you drive, even where you park); the amount and type of coverage you choose, and whether you shop around for coverage.

Following are explanations based on How Much Does Car Insurance Cost? From The Simple Dollar:

BASIC DEMOGRAPHICS: Insurance companies have an enormous amount of data that tells them how each of these things makes you more or less of a risk for filing claims. For example, a younger (typically, age 25 or below), unmarried and male will pay more than an older, married female. There’s not much you can do about this other than get older and married – and move somewhere like Maine, Ohio or Idaho. You can find more details on how much location can cost at

THE VEHICLE YOU DRIVE: The basic rule of thumb is … the faster the car can go, the bigger the risk of a crash and the more you’ll pay for the thrill of driving it. “If you drive a sensible family car such as a minivan, sedan or SUV, you probably won’t pay nearly as much as someone who drives a pricey, high-performance sports car.” You also can save some money by purchasing a used car, which will “always be cheaper to insure” than a new one, or get anti-theft devices and safety equipment.

DRIVING HISTORY: That is, the more tickets and violations you have, the higher your insurance rates likely will be. Unless you have a time machine, there’s not much you can do about this right away, although you could install a tracker that records data on driving habits or take a defensive driving course to demonstrate to insurance companies that you’ve turned over a new leaf. “Typically, you won’t be penalized for bad driving, but you could be rewarded for good driving,” says The Simple Dollar.

CREDIT SCORE: Insurers cite data that shows the higher a driver’s credit score, the less likely he/she is to file a claim, and that a driver with a poor credit score is more likely to file a claim. If your credit is bruised, “there’s no quick fix … but raising your credit score is still enormously worthwhile.”

DRIVING HABITS: Drive less, pay less by reducing mileage, using public transportation or carpooling, although that may be easier said than done in a lot of locations – like, say, Montana, which has the second-highest average car insurance rate in the country at $2,297, reports.

AMOUNT AND TYPE OF COVERAGE: What is your maximum coverage and your deductible? Are you carrying personal injury protection (not required in all states) and comprehensive vehicle coverage? Whether you carry more or less insurance than required in your state, precisely how you answer these questions can make a big difference in how much you pay monthly for insurance.

SHOPPING AROUND: Whatever your situation otherwise, “you should always look around to make sure you get the best deal, since each company places a slightly different emphasis on the factors above.”

The details here should help ensure you are reassured when seeking insurance for your vehicle.

Make the most of it.