How Your Auto Rates Are Determined

Last updated: March 29, 2016

Understanding Underwriting and Rating

Generally speaking, two factors govern what you pay for auto insurance: Underwriting and Rating


Underwriting is when an insurance company considers your application for auto coverage. It will look at many different factors about you and your driving habits. Just because you apply does not mean they will provide you coverage. However, if they offer you coverage, there are some factors that will influence your premiums. This includes things like:

  • Your driving record

  • Where you live

  • Your car's make and model

  • How much you drive and where you drive

  • Gender

  • Age

  • Prior insurance coverage


After completing the underwriting, the insurance company determines your rating as a driver. Typically, you could be either a preferred, standard, or non-standard driver. (Each company has its own rating system for deciding whether to insure you.) Drivers with the lowest risk factors will receive the lowest rates. Risk is based upon the chance you will have an insurance claim.

1. Preferred Driver

These are drivers that companies consider to be the best risks and safest drivers. These drivers usually have clean driving records over the past three to five years. Insurance companies grant them the lowest rates.

2. Standard Driver

A standard driver is a moderate risk driver. The rates are higher than the preferred rates. These drivers are usually driving family-type cars and have a reasonably clean driving record.

3. Non-Standard Driver

These drivers are high-risk. Usually drivers in this category have the highest rates. These drivers may include:

  • Drivers under 25 with less driving experience

  • Drivers with tickets or accidents

  • Drivers with a poor premium payment history

  • Drivers with a reckless or drunk-driving history

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