Different insurance companies have different criteria for determining premium prices. But when it comes to auto insurance, some common factors cut across all insurance providers. And no, color isn't among these factors, so ignore the common misconception that red cars are expensive to insure.

As a car owner, you need to know the real factors that can determine the cost of insurance, as this can guide you to get the best deal in the market. Below are the top factors that determine auto insurance costs:

Demographic Factors

Where you live affects how much premiums you pay to your insurance company. If you live in an urban setting, it's assumed that your vehicle is at a higher risk because there are more cases of accidents, vandalism, and theft. As a result, you're required to pay more premiums than a car owner in rural settings.

Other demographic aspects like age also determine the cost of your insurance. Young drivers are considered inexperienced and more likely to cause accidents; hence they'll pay more premiums. On the other hand, drivers that are believed to cause fewer accidents and are less likely to drive under alcohol influence will often pay less for auto insurance than other drivers. 

Your Driving Habits

If you have regular long journeys, it's assumed that you're at a higher risk of causing an accident, meaning you'll pay more for insurance. If you only use your car occasionally, you'll pay less.

Again, if you have been previously involved in many traffic violations or accidents, you will pay more premiums than someone whose record is clean. You're also likely to pay more if you're a first-time driver. 

Your Type of Coverage, Deductibles, and Limits

If you have taken a full coverage auto insurance plan, you'll pay more premiums than a person who only has liability coverage because your protections are more. 

You can reduce the amount you pay for premiums by agreeing to pay a high deductible. If the deductible is low, the insurance company will require you to pay more for your policy. A limit refers to the maximum amount your insurance plan can pay towards a claim. As is expected, the more limits, the more premiums you're going to pay, and vice versa.

Your Credit History

An auto insurance company can assess your credit history to determine your premium amounts. If you have been paying off your debts and bills on time, your credit history is likely to be positive, and the insurance cost will be low. On the other hand, if you have accumulated unpaid debts and late payments, the credit history is negative, and you may have to pay more for insurance.