How is car insurance calculated?

Many drivers could save money with Metromile because they don’t drive often. Metromile customizes bills based on someone’s driving habits.

Have you ever wondered how your auto insurance rate is calculated?

Most car insurance companies consider your driving record, the type of car you drive, how much policy coverage you want, and demographic information, such as your age or where you live and park your car. 

But Metromile takes it a step further and focuses the rate you pay on how you drive.

Unlike other insurance companies, Metromile’s rates are based on how far you drive. Instead of paying a fixed rate, your actual car usage determines your car insurance premiums. This means low-mileage drivers could save money with one of our pay-per-mile insurance policies. And if you’re a safe driver, we want to recognize and reward that behavior, too.

But before we get into all that, let’s take a look at how insurance companies calculate car insurance rates.

What factors into my car insurance rates?

Car insurance companies look at certain factors when setting your rates.

While each insurer has its proprietary formula, many insurance companies tend to use the same information to calculate your car insurance premiums:

  • Your age
  • Your gender (in some states)
  • Your education (in some states)
  • Your job (in some states)
  • What type of car you drive
  • Where you live
  • Your credit score (in some states)
  • Your driving record
  • Your insurance record

Age

Your age can play a big role in determining your car insurance rates.

Studies have shown that young drivers, especially teenagers, who might have less experience on the road, are more likely to get into car accidents than older drivers. So if you’re just starting, your rates might be higher due to the increased risk.

The best thing you can do is prove you’re a safe driver by following the rules of the road, so you don’t get traffic tickets or into accidents. 

Over time, insurance companies will reward your safe driving with lower prices or discounts. 

Gender

Gender might also play a role in determining your car insurance rates.

Men are more than twice as likely to be killed in a car accident than women, according to the nonprofit Insurance Institute for Highway Safety. In 2019, the most recent year for which data is available, 11,896 male drivers lost their lives in crashes, compared to 4,868 female drivers.

This might be because men tend to drive more often and may be more willing to take risks on the road.

So you might be surprised to learn that some auto insurance industry studies show women, including those older than 25, might pay a little more than men for car insurance.

Because of this, places like California, Hawaii, Massachusetts, Montana, Pennsylvania, North Carolina, and certain areas in Michigan have banned car insurance companies from considering gender when calculating a driver’s rates. But in many other states, insurance companies can still consider gender.

Education

Some car insurance companies also look at your education.

While some states have banned this practice, in other states, drivers with a higher level of education, such as those with a college degree, could save money on car insurance compared to those who only have a high school diploma.

Some insurers might also provide a discount for college students.

Occupation

Auto insurers might also look at the type of job you have.

While this practice is not allowed in some states, your job could affect your insurance rates in other places. 

Some companies and professional groups work with insurers to provide an auto insurance discount to their employees. On the other hand, some professions might travel a lot more than other drivers, for example, and might be considered riskier and pay higher rates.

Car type

Car insurance companies also look at the type of car you drive.

If you trade in an older vehicle for a fancy sports car, it stands to reason you might pay more for insurance because your new car would cost more to replace. The more expensive it is to replace your vehicle, the greater the risk and cost for your insurance company. So they might charge a higher premium to make up for the pricey repairs.

Geography

Where you live can have a big impact on your car insurance premiums. 

That’s because some places are more dangerous for car owners than others. 

No matter how safe of a driver you are, sometimes accidents caused by other drivers are unavoidable. And even if you don’t get into an accident, your car could get stolen or affected by the weather.

So if you live in a big city with more cars on the road, where accidents and vehicle thefts might be more common, you might pay more for insurance than if you lived in a rural town.

Some car insurance companies might also ask you where you park your vehicle at night and whether it’s parked somewhere covered. It could be riskier to park your car on the street than inside your home’s garage, and this additional risk could increase your car insurance rate.

Credit score

Building an excellent credit score is not only a good way to qualify for an auto loan with low interest rates, but it could also save you money on car insurance.

In some states, car insurance companies might use your credit score to determine how responsible you are. They figure if you’re responsible with your finances, you’re more likely to be a responsible driver or less likely to file a claim.

Insurance record

Similar to your credit score, car insurance companies track your auto insurance history.

They look at previous claims you’ve filed and whether you maintained continuous insurance coverage. If you filed a claim after an accident or totaling your car, that could factor into your rates. Likewise, in many states, if you sell your car, stop driving and skip insurance coverage for a few years, it might be more expensive when you start back up.

Driving record

As you might imagine, car insurance companies are especially concerned with your driving record.

While things like your age, gender, and where you live might help car insurance companies gauge your risk, your driving record provides the most accurate representation of the type of driver you are.

If you have a pile of speeding tickets or were at fault in a car accident, your car insurance rates could skyrocket.

But over time, a clean driving record can go a long way toward helping you save money on car insurance.

What things DON’T affect the price of car insurance?

You might have been surprised about some of the information car insurance companies might use to determine your rates. But you’ll be relieved to know that your race, ethnicity, and religion should never be factored into your car insurance rates.

That information is strictly off-limits.

Furthermore, while insurance companies might look at the type of job you have, they’re not supposed to factor in your income into your car insurance rates.

How does Metromile calculate my car insurance rates?

At Metromile, we care more about the way you drive.

Our pay-per-mile car insurance policies focus on your driving record, insurance claims history, the type of vehicle you drive, the amount of coverage you get, and theft and accident rates in the neighborhood where you live.

In some states, we might also consider your age, driving experience, education, profession, and whether you’ve had continuous insurance coverage.

But what sets Metromile apart is our ability to look at your driving patterns in some states. The Pulse device we send you to count your miles can also gauge how safely you drive over time and give us an understanding of the quality of each mile you drive.

All of this information helps us get a better picture of you as a driver to personalize your insurance rates, and hopefully, offer you a lower price.

How can I save money on car insurance?

Now that you know how car insurance is calculated, let’s take a look at how you could save money on car insurance.

Here are a few ideas to get you started:

  • Shop around: Compare prices from different car insurance companies to make sure you’re getting the best price. Auto insurance prices can change over time, so you’ll want to stay up to date on the latest rates.
  • Take a closer look at your insurance coverage: You might be able to adjust your coverage levels or deductible to save money on your monthly premiums if your lifestyle has changed. But it’s crucial to weigh the pros and cons before making any changes to your policy.
  • Drive safely: Metromile offers discounts to good drivers who are accident-free and mature drivers, as well as those who install safety equipment in their cars in select states. 

The bottom line

One of the easiest ways to pay less for auto insurance is to drive less. Low-mileage drivers could save hundreds with a pay-as-you-go car insurance policy from Metromile.

Metromile offers a Ride Along™, so you can try before you buy for free. 

After you download the app and get a free auto insurance quote, you’ll have a 17-day trial period (you should keep your current insurance provider to maintain coverage) to show us how much you drive and whether you’re a safe driver. We’ll then use how you drive to show you an accurate rate or give you a discount up to an additional 15% off your quote, depending on your state, for safe driving.