Car insurance premiums are set by assessing the risk an insurance company takes on to cover a specific driver and vehicle. Insurers evaluate a variety of factors – from your driving record and age to your location and type of car – to estimate how likely you are to file a claim and how costly that claim might be. Essentially, the higher your perceived risk, the higher your premium will be. Insurance companies use statistical models and accident data to adjust a base rate up or down based on your personal details.
For example, a driver with multiple accidents will pay more than one with a clean record, and a luxury car typically costs more to insure than an older, modest vehicle. Every insurer weighs factors a little differently, which is why shopping around for quotes can save you money.
If you’re looking for affordable car insurance in Illinois, Insure on the Spot can help you find the best rate for your situation – call 773-202-5060 to get started!
What Is a Car Insurance Premium?
A car insurance premium is the amount you pay an insurance company to maintain an active auto insurance policy. In exchange for your premium payments (whether made monthly, quarterly, or annually), the insurer agrees to provide financial protection by covering claims as outlined in your policy. If you stop paying the premium, the insurer can cancel your policy, which means you would no longer have coverage.
Premiums can vary widely from person to person. For context, the average cost of full coverage car insurance in the U.S. is around $2,388 per year as of late 2024. In Illinois specifically, drivers pay about $2,423 per year on average for full coverage (and roughly $677 per year for minimum coverage). Your own premium could be much higher or lower than these figures, depending on how “risky” of a driver you appear to the insurance company.
Payment Options:
Most insurers offer flexibility in how you pay your premium. You might pay month-to-month, every six months, or yearly. Often, paying a full six- or 12-month premium upfront can earn you a small discount compared to monthly payments. But be sure the schedule you choose fits your budget – what matters most is keeping the policy active so you’re not driving uninsured (which is illegal in Illinois).
Remember, your premium is essentially the price of your insurance safety net – it keeps your coverage in force so that if an accident or loss happens, you have help paying for the damages.
What Factors Influence Your Car Insurance Premium?
Insurance companies consider a wide range of factors when determining your auto insurance premium. These factors are based on accident statistics and risk analysis – in other words, insurers look at data to figure out which types of drivers (or vehicles) are more likely to cost them money in claims.
Below are the top factors that influence car insurance rates, explained in everyday language. Keep in mind that Illinois insurers use all of these factors (Illinois allows credit score and other personal factors to be used in pricing), and while you can’t change some factors (like your age), understanding them can help you find ways to save.
Your Driving Record and Claims History
Your driving history is one of the biggest factors in your premium. Simply put, safe drivers pay less. If you have a clean driving record – no recent accidents, tickets, or DUIs – insurers see you as low-risk and will offer lower rates. On the other hand, if you’ve had accidents or serious traffic violations, you’ll pay more for coverage. Drivers who have multiple claims (insurance payouts for crashes or damage) also face higher premiums. Insurance companies assume that if you’ve had several incidents in the past, you’re more likely to have another. In fact, even one at-fault accident or a DUI can sharply increase your rate for years.
How Much and How Often You Drive
Mileage matters. The more you drive in a typical year, the greater your exposure to potential accidents. Insurers ask how many miles you drive each year or whether you use your car for commuting, pleasure, or business.
If you have a long daily commute or drive for work, you likely fall into a higher-risk category and will pay more. Conversely, if you only use your car occasionally (so-called “pleasure use”), or you have a very short commute, you’ll often get a lower rate.
Where You Live
Your location has a significant impact on auto insurance premiums. Insurers analyze ZIP code data for traffic, crime, and claim trends. If you live in a densely populated city or a neighborhood with high accident rates or vehicle theft frequencies, you’ll pay more for insurance than someone in a small town or low-crime area.
For example, Chicago drivers typically face higher premiums than those in rural downstate Illinois, because urban areas have more cars on the road (hence more accidents) and often more theft or vandalism.
The Car You Drive
The vehicle you drive is another major piece of the puzzle. Insurers examine the make, model, and year of your car to estimate how expensive it would be to repair or replace it if you had a claim.
Luxury cars, sports cars, or newer models typically cost more to insure because their parts are costly and they might be expensive to replace. If your car has a high likelihood of theft or is known for being involved in more severe accidents, insurers may charge more as well.
Your Age and Experience
Age plays a significant role in car insurance pricing because it correlates with driving experience and risk. Generally, teenagers and young adults pay the highest premiums.
Drivers under 25 are statistically much more likely to be in accidents, so insurers charge them more to offset that risk. For example, an 18-year-old in Illinois will face substantially higher rates than a 40-year-old driver with the same profile. Rates typically drop by your mid-20s once you gain experience and a proven record.
Gender and Marital Status
Your gender and marital status can also influence your premium, although these factors are a bit more subtle. In many states (including Illinois), insurance companies are allowed to use gender in their rate calculations.
Statistically, men – especially young men – tend to get into more serious accidents than women. This means young male drivers often face higher rates than their female counterparts.
Credit History
Believe it or not, your credit history can impact your car insurance premium. Most insurers (in states that allow it) use a “credit-based insurance score” derived from your credit report as a factor. This is because studies have shown a correlation between lower credit scores and a higher likelihood of insurance losses (claims).
In Illinois, insurers can use credit scoring in pricing. So if you have poor credit or a short credit history, you might be charged more, whereas a person with excellent credit may get a better rate.
Education and Occupation
Some auto insurance companies factor in your education level or occupation when setting rates. For example, statistically, individuals with a college degree or certain professions (like teachers, engineers, or military) may have slightly lower claim rates.
Coverage Choices and Deductibles
The amount and types of coverage in your policy significantly affect your premium cost. A basic policy that only meets Illinois’s minimum required liability limits (25/50/20 for bodily injury and property damage) will be much cheaper than a full-coverage policy with higher liability limits plus collision and comprehensive coverage.
FAQ: Car Insurance Premiums
Q: What factors determine car insurance premiums?
A: Car insurance premiums are primarily determined by the level of risk an insurer associates with a driver. Key factors include your driving record, age, location, vehicle type, annual mileage, and sometimes personal details like credit score and marital status.
Q: How do insurance companies calculate the premium from these factors?
A: Insurers use statistical models and historical data to calculate premiums. They start with a base rate and adjust it for each risk factor in your profile.
Q: Why did my car insurance premium increase even though I didn’t have an accident?
A: Insurance premiums can increase due to factors outside your control, like rising repair costs, inflation, or overall trends in accident statistics.
Q: How can I lower my car insurance premium?
A: To lower your premium, maintain a clean driving record, ask about discounts, raise your deductible, and compare quotes from different insurers.
Q: What is an SR-22 and does it affect premiums?
A: An SR-22 is a form insurers file with the state to prove you have the required insurance. It usually leads to higher premiums due to the increased risk.
Q: Are car insurance premiums negotiable?
A: Generally, premiums are not negotiable, but you can adjust your coverage or ask for discounts. Comparing quotes from other insurers is a good strategy.
Get a Quote Today!
If you’re in Illinois and want to get a quote for affordable car insurance, call 773-202-5060 or get a fast quote online with Insure on the Spot today!