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6 Factors Influencing Car Insurance Premium

Curious to know the right method to calculate your insurance premium? Check out the necessary factors that determine how your insurance premium is calculated.

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Negotiating is an art, and if it is backed by the right information about the product in question, chances of striking a great deal are high.

This mantra certainly holds true in the case of your car insurance premium too. You want to spend minimum possible amount to get the maximum possible cover. Your bargaining power can get an edge if you are aware of the factors that affect your overall car insurance premium calculation.

Let’s see what they are:

1. The Vehicle You Drive

A sturdier and safer vehicle poses fewer risks for the driver. For the insurance company, it means reduced risk or compensation claims. Also, if you chose a car that is closed or covered with featured locks, there is a lower risk of theft. On the other hand, a premium car like a sports car would have a higher risk of theft along with speed driving. Choosing simpler cars can get you lower premium rates as compared to luxury cars.

In this reference, the cubic capacity of the vehicle or the size in which the engine is measured impacts your insurance premium. This applies to both used and new cars.

IDV or Insured Declared Value is defined as the depreciated value of a car. Both the policyholder and the insurer agree upon the same. With age, IDV reduces or depreciates. So the older your car, the lesser amount you can claim.

2. Demographic Aspects

Yes, it has nothing to do with your car! Yet, these demographic factors influence your car insurance premium calculation.


A middle-aged driver would be less prone to minor accidents due to better vision and agile motor skills. Comparatively, a young driver could be prone to rash driving while an older driver may have more accidents due to poor eyesight or slower motor skills.

Marital Status

Research shows that married people tend to have fewer accidents as compared to single individuals. In particular, men get lower premium rates after marriage.


Statistics reveal that teenage boys are more prone to accidents as compared to girls. On the other hand, middle-aged and older women have a higher accident record.

3. Driving History and Insurance Record

Your past driving history and insurance records are evaluated when applying for car insurance. If you have a clean driving record with negligible accidents and insurance claims, then you are likely to get lower rates. On the other hand, bad driving record with high accident listings and insurance claims will result in higher premiums.

4. Driving Zone, Time and Activity

Do you live in the suburbs and drive to the down town every day? How often do you use the car? Long distance commuting means increased miles, which adds to risks of accidents. As your annual driving mileage peaks, so do your premium rates. On the other hand, if you use public transport mostly and take out the cars on weekends, risks of accidents are lesser.

5. Location of Residence and Workplace

If you are living in an area or work in a zone that is prone to vandalism, you are likely to get higher premiums. Simply put, parking your car in a dangerous zone means higher chances of thefts or damage. Comparatively, individuals living in safer areas or residential neighborhoods would benefit with lower premiums.

6. Your Credit History

Credit history is defined as the previous financial record of a policyholder. This includes a list of their employment, loans, debts, repayments and even credit card dues. An insurance company is likely to check these because a good credit score or history reflects positively on the bearer. Hence, they are likely to pay their premiums on time, drive safer, etc. resulting in lower risks for the insurance company.

These are some of the factors that affect your car insurance premium calculation. Now there’s not much that you can do about the age factor here. Nor can you relocate to another town – well not at least for the sake of lower premiums!

However, credit history, driving habits and the car model you buy are some of the factors you can control to reduce premiums. Regular repayments and debt clearance, less of punches in the driving license, etc. would reflect on getting better premium rates.

Get lowest quotes for Car Insurance

Avail upto 60% discount on Premium.

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Aniket Thakker
Written by Aniket Thakker
He lives off TV shows, movies, junk food, comics and sarcasm. When he is not working as a freelance imaginary friend to other beings like him, he works as VP of Marketing at Coverfox.

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