When one buys a car it is necessary for the person to buy auto(motor) insurance on the car to protect the car against loss, damage, theft, or any risk the individual may come across while using the car. There are different factors that determine the price of an Auto insurance premium.

Everyone who wants to buy auto insurance needs to know these factors. Knowing these factors will make you know what auto insurance to expect when you decide to buy an auto insurance policy for your car.

Insurance companies consider some factors before they place a price tag on an individual’s auto insurance premium. Read up to know these factors.


Premium is the amount of money stated in an insurance policy that an individual is to pay to an insurance company periodically in order to maintain their insurance coverage. 

Premium differs from person to person, from liability to liability, and from company to company and is determined by different factors.

The premium attached to an insurance policy is used to ensure coverage of any liability connected to it.

Factors that determine the price of Auto insurance premium

While there are different premium calculators, there are some underlying factors that determine the price of an Auto insurance premium one is charged. these factors include:

Factors that determine the cost of Auto insurance premium


The premium rates for older drivers are lower than that of younger drivers because younger drivers tend to be more prone to the risk of accidents than older drivers.


How much experience one has driving is also a determinant factor. A more experienced driver will know how to avoid some kinds of accident than a novice driver, in other words, a more experienced driver’s auto insurance premium is likely going to be lesser than that of an inexperienced or novice driver.


Women generally tend to get into fewer accidents than men, and they have a lower tendency to be involved in driving under the influence of alcohol. It is no surprise if they get to pay less than men.

Driving record

If you have records of committing any driving offense, your premium is likely to be more than one who doesn’t have. In other words, the cleaner your records the lower your rates.


Location is an important factor because the drivers in urban areas tend to be charged higher than those in rural areas because of the higher rate of theft, accident, and vandalism in the urban areas. Also where the car is parked in its secured place or not and if anti-theft features are installed in the car are determinant factors.

Frequency of car usage

How often you use your car is also a determinant factor of the price of your premium. How far you drive a car also affects the premium. if you drive a car regularly and/or for a long-distance you will be charged a higher rate.

Type of car

Cost of car, the tendency of theft, cost of repair, size of the engine, and general safety of the car are determinant factors of the price at which a car is being insured.

An expensive car means a high premium rate, and so is a car with a high theft tendency, high cost of repair, big engine size, or low general safety.


Certain occupations require out to drive for longer hours,  drive late at night, transport valuable equipment or work in areas with high risk. These categories of drivers tend to incur a higher premium.

On the other hand, those who spend lesser hours driving, do not drive at night, do not transport equipment, or work in areas with low risk, attract a lower rate.


If an already insured car gets improved upon, it is important to inform the insurer. this would increase the premium but a lack of information can make the insured lose claims in future