Thursday, May 30, 2024

Why Car Insurance Quotes Vary So Much

If you shop around for car insurance, you’ll likely gather a range of quotes from different companies. One thing that will stand out is how much the prices vary.

You may wonder why there are such variances when all the quotes are for the same insurance product. The reasoning behind it may surprise you and leave you a little more educated on car insurance.

The Basics of a Quote

When an insurance company gives you an auto insurance quote, it will need to gather a lot of information from you. The insurer’s goal in collecting this information is to decide how much of a risk you are to insure.

Risk is significant for insurance products because it tells the insurer the likelihood that you’ll make a claim. If you make a claim, the company loses money. These companies are in the business of making money, so they want to minimize the potential for claims.

If the company determines by looking over your information that you pose a high risk, it will charge you more for your policy. However, the formula a company uses to decide this isn’t public information.

In fact, Business Insider explains that every company uses a different formula as there’s no industry standard. The formula for each company may use different factors and weigh those factors differently, which is why your insurance quotes from various companies don’t end up being the same.

Factors Affecting Insurance Rates That You Can Control

What we do know about auto insurance company formulas is that they involve certain factors most of the time. There are factors you can control and those you can’t. Let’s take a look at the factors you have some ability to manipulate:

  • Driving record
  • Type of coverage
  • Location
  • Driving habits
  • Vehicle
  • Credit history

Driving Record

You can ensure that no matter which company you get an auto insurance quote from, the company will look at your driving record and use it in its formula. The Insurance Information Institute states that accidents and serious violations will raise your rates. New drivers will also have higher rates because they lack a significant driving record that tells the insurance company about their driving abilities. The good news is that you’ll probably get some nice rates if you have a stellar driving record.

Keep in mind that your driving record does change in time. If you received a speeding ticket ten years ago, it wouldn’t show on your record anymore, and it wouldn’t count against you. Time can help you overcome bad marks on your record, and in the meantime, you should drive more carefully.

Type of Coverage

You get to choose the type and amount of coverage you want to buy. The more insurance you buy, the higher your rate. If you go with the minimum required by law, you should get the lowest rates. However, when choosing insurance products, you should always select the coverage you need and not base your choices on price alone.

You can alter your deductible. The deductible is the amount of money you have to pay before the insurance pays on a claim. Higher deductibles will lower your rates.


This factor is partly under your control and partly not under your control. The insurance companies look at accident and theft rates in your area and assign risk to your location. If people in your city or surrounding area make a lot of claims, that will result in higher rates for you.

The option you have is to move somewhere with fewer accidents and less crime. Note that urban areas usually have higher rates than rural areas.

Your insurer will also consider other things that could result in claims. For example, if you live in an area that gets intense storms regularly, it will raise your rates. Again, you could move somewhere else that doesn’t have severe weather issues.

Driving Habits

Driving habits are a little different from your driving record. Your habits include things like how much you drive and how far you drive. If you commute to work, you’ll have higher insurance rates than someone who only uses their vehicle for pleasure.

Some companies also give you an option to install a device in your vehicle to measure your driving habits. These devices measure your distance traveled, the amount of driving when you drive, and your speed and braking habits.


The vehicle or vehicles you insure will impact your rates because the company will consider factors about the car:

  • Replacement cost
  • Repair cost
  • Damage it can do to another vehicle

If you have a car that will be expensive to replace or repair, or you drive a large vehicle that could cause extreme damage to other vehicles in an accident, you can expect to pay more.


Not all states allow the use of credit to determine insurance rates, but in states that do, you can expect your insurer to run a credit check. Bad credit can equal higher rates because experts say people with bad credit file more claims.

Factors Affecting Insurance Rates That You Can’t Control

There are some things an insurance company will look at that you can’t do anything about, but that still factor into the formula to decide your rates:

  • Age
  • Gender
  • State law
  • Healthcare costs


Generally speaking, older drivers pay less because they have fewer accidents. Teens pay the most due to higher accident risks. In addition, the older you are, the more experience you have behind the wheel, which also equates to lower risk in the mind of an insurance company.


Women usually have lower rates because they have fewer accidents, and get fewer serious violations for things such as drunk driving.

State Law

Almost all states have minimum coverage requirements. You must get at least that amount, which is higher in some states than others. In addition, if you live in a no-fault state, you’ll get a higher quote than someone not in a no-fault state because the law requires your insurer to pay for any accident you have regardless of fault. The insurance company has to factor risk on a broader scale than just the risk you pose.

Also, some states will pass laws that affect insurance companies directly. Regulations and other companies’ requirements increase their operating costs, so they pass that expense to you.

Healthcare Costs

The rising expenses of health insurance are also impacting the costs of auto insurance. If the insurer has to pay more for medical claims, then you will, too.

Getting the Best Quote

Now that you have a better idea of the factors impacting your auto insurance quotes and why they vary so much, you can be a more educated insurance shopper. Use what you know to put yourself in the best situation to get a great auto insurance quote.

Sam Allcock
Sam Allcock
Sam heads up Cheshire-based PR Fire, an online platform that has already helped over 10,000 businesses to grab widespread media coverage on their news at an extremely accessible price point.

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