Car insurance rates are calculated by estimating how likely you are to file a claim and how much that claim could cost. Insurers start with a base rate for your state, area and coverage. They then adjust it up or down using rating factors such as your driving record, vehicle, annual mileage, age and, in most states, a credit-based insurance score. Discounts come off at the end.
Every step happens inside rules set by your state. States decide which factors are allowed, and state regulators review the rates insurers file. That is why the same driver can see very different prices in different states.
This guide walks through the main rating factors, the states that ban or limit credit and gender rating, and how rates are filed and approved. It is general education, not advice. We do not sell insurance or give quotes.
How is a car insurance premium built?
A premium is built in layers: a base rate, adjustments for your risk factors, the coverage you choose, and then discounts and fees.
- Base rate. The insurer sets a starting rate for each coverage in each area, based on past claims and expected costs.
- Rating factors. The base rate is multiplied up or down for factors like your record, car and mileage.
- Coverage choices. Higher limits and lower deductibles cost more. Adding collision and comprehensive adds to the price.
- Discounts. Savings for things like a clean record, bundling or safety features are applied.
- Fees and surcharges. Some states add policy fees or assessments.
Which factors affect car insurance rates the most?
The factors below are the most common. The Insurance Information Institute (III) lists driving record, use and mileage, location, age, vehicle, credit-based insurance score and coverage choices among the main drivers of price (III, accessed October 2026). How much each one counts varies by insurer and state.
| Factor | Why insurers use it | Can you change it? |
|---|---|---|
| Driving record | Past crashes and violations predict future claims | Over time, by driving safely |
| Location (ZIP code or territory) | Theft, traffic, repair and medical costs differ by area | Only by moving |
| Vehicle | Repair cost, theft risk, safety record and damage to others vary | Yes, when you buy a car |
| Annual mileage and use | More time on the road means more chance of a crash | Sometimes |
| Age and driving experience | Newer drivers have more crashes on average | Experience grows with time |
| Credit-based insurance score (where allowed) | Insurers say it helps predict claims | Over time |
| Coverage, limits and deductibles | More coverage means more the insurer may pay | Yes |
| Claims history | Prior claims may predict future claims | Over time |
Driving record
Crashes you caused and serious violations, such as DUI or reckless driving, usually raise your rate for several years. Minor tickets can too. A clean record often earns a discount. In California, insurers must offer a Good Driver Discount: a driver licensed for at least three years who meets the standard must get a rate at least 20% lower than a non-Good Driver would pay for the same coverage (California Department of Insurance, accessed October 2026).
Location
Where you live and park matters in most states. The III notes that urban drivers often pay more because of higher rates of vandalism, theft and accidents, and that medical costs, repair costs, litigation and weather vary by area (III, accessed October 2026).
Vehicle
The car’s price, repair costs, theft rate, safety record and how much damage it might do to others all affect price. A car that is expensive to fix will usually cost more to insure for collision and comprehensive.
Mileage and use
The more you drive, the more chance of a crash. Commuting or business use usually costs more than pleasure use. Some insurers offer usage-based programs that track driving with an app or device. These are optional, and how data is used varies, so read the terms first.
Age and experience
Young and newly licensed drivers have more crashes on average, so they generally pay more. The III notes that insurers generally charge more when teens or drivers under 25 use your car (III, accessed October 2026). Our guide to adding a teen driver to car insurance explains ways to manage the cost.
Does your credit score affect car insurance rates?
In most states, yes. Many insurers use a credit-based insurance score, which is different from the credit score a lender uses.
The NAIC explains that insurance scores are usually one factor among many. It also says that in most states, insurers cannot use these scores as the only reason to raise your rate, deny, cancel or not renew a policy (NAIC, last updated March 19, 2026). Critics argue the scores can hurt people after illness, job loss or other hardship that does not make them riskier drivers.
Consumers generally have the right to receive notice, review their credit report and dispute errors, according to the NAIC. Under the federal Fair Credit Reporting Act, if information in your credit report leads to a higher rate or other adverse action, the insurer must tell you and name the credit bureau it used.
Which states ban or restrict credit-based insurance scores?
A few states do not allow credit-based insurance scores in car insurance pricing at all, and others restrict how they can be used. As of October 2026:
| State | Rule for auto insurance |
|---|---|
| California | Not allowed. Proposition 103 requires rates to be based mainly on driving record, miles driven and years of experience, and credit is not a permitted factor |
| Hawaii | Not allowed. State law bars using credit history in auto rating |
| Massachusetts | Not allowed in auto rating under state regulation |
| Michigan | Restricted. The 2019 auto insurance reform limits the use of credit information and other non-driving factors |
| Other states | Many limit specific uses, such as raising your rate at renewal based only on credit, or require exceptions for extraordinary life events |
If you live in a state that allows insurance scores, insurers that use them must still follow the state’s rules and their own filed rating plan.
Can insurers use gender, marital status or other personal factors?
It depends on the state. Some states ban certain factors, and every state bans rating by race, religion or national origin.
States including California, Hawaii, Massachusetts, Michigan, Montana, North Carolina and Pennsylvania do not allow insurers to use gender as an auto rating factor, under their state laws and regulations. In other states, gender may be used if it is part of a rating plan filed under state rules. The III notes that in states that allow it, women often pay less than men because, on average, they have fewer and less serious accidents (III, accessed October 2026).
Other personal factors, such as marital status, education, occupation and home ownership, are allowed in some states and limited in others. Michigan’s 2019 reform, for example, restricted several of these non-driving factors. Because the rules vary so much, the most reliable answer for your state comes from your state insurance department.
How are car insurance rates filed and approved?
Insurers must file their rates and rating rules with each state’s insurance regulator. How closely the state reviews them before use depends on the state’s system.
| System | How it works |
|---|---|
| Prior approval | The regulator must approve rates before the insurer can use them |
| File and use | The insurer files rates and can use them after filing, or after a short waiting period, while the regulator reviews them |
| Use and file | The insurer can use new rates first and must file them within a set time |
| Flex rating | Changes within a set range can be used with less review; bigger changes need approval |
In every system, state law generally requires that rates are not excessive, inadequate or unfairly discriminatory. Regulators can reject or order changes to rates that break those rules.
California is a well-known prior-approval state. Under Proposition 103, insurers generally need the Insurance Commissioner’s approval before using a property and casualty rate, and the law created a process that lets qualified members of the public, called intervenors, take part in rate reviews (California Department of Insurance, accessed October 2026). Other states also require approved rates before certain changes. For example, New Jersey told auto insurers in a 2025 bulletin that they must have approved rates on file for the state’s new minimum limits taking effect January 1, 2026 (New Jersey Department of Banking and Insurance, Bulletin No. 25-06).
Many states post rate filings publicly, often through a filing search on the insurance department’s website. You can see what changes an insurer asked for and what was approved.
Why do rates change at renewal?
Your rate can change at each renewal for two kinds of reasons: changes to the insurer’s overall rates, and changes in your own situation.
- Overall rate changes. Repair costs, medical costs, claim trends and weather losses in your state all feed into new rate filings.
- Your profile. A new ticket, a claim, a new car, a move, or a new driver in your home can all change your price.
- Discounts ending. A new-customer or good-student discount may end.
- Coverage changes. Rate changes can also follow changes to limits, such as when your state raises its minimum liability limits. Our state minimum car insurance guide lists recent changes.
How can you lower your car insurance rate?
You cannot change every factor, but several are within your control.
- Keep a clean driving record. Violations and at-fault crashes usually affect rates for years.
- Review your deductibles. A higher collision and comprehensive deductible lowers your premium, but only choose one you could pay from savings.
- Report accurate mileage. If you drive less than before, tell your insurer.
- Ask about discounts. Common ones include safe driver, multi-policy, good student and safety feature discounts. See our car and home insurance discounts guide.
- Compare like for like. Get quotes with identical coverage from several insurers. Our guide on how to compare insurance quotes has a checklist.
- Do not cut coverage you need just to save money. Learn what each part of your policy does in our guide to car insurance coverage types.
The bottom line
Car insurance rates come from a mix of risk factors, coverage choices and state rules. Your driving record, location, vehicle, mileage and experience matter almost everywhere. Credit-based insurance scores and gender count in some states but not others. Behind every price is a rate filing reviewed by your state regulator. Knowing the factors helps you ask better questions, correct errors and focus on the changes that can actually lower your price.
