Have you ever wondered how insurance companies calculate the premium for your auto insurance? Insurance is a big chunk of many people's budgets, so anything you can do to lower your rate can make a big difference (find out whether you live in one of The Top 5 States with the Highest Auto Insurance Premiums). And the first step to getting a better rate is understanding what factors influence it.

Here are five basic factors that your insurer considers when pricing your auto insurance policy.

Age Matters When You Buy Insurance

It might not seem fair, but your age matters when you buy auto insurance. To be more precise, it's inexperience that drives up your premiums. Drivers under 25 pay the highest premiums because they haven't had much time behind the wheel. Even older policyholders who are new to driving get higher rates.

Insurers also significantly increase premiums when a parent who is a seasoned driver tacks an inexperienced child onto their existing policy. Again, that puts someone without much driving experience behind the wheel, which correlates with higher risk.

That might seem arbitrary, but insurers come up with these rate changes by analyzing auto accident statistics and the claims filed each year. And what they learn is what causes them to raise young drivers' premiums. According to the National Highway Traffic Safety Administration, traffic crashes are the leading cause of death for young drivers in the United States, and most are due to alcohol. Since experienced drivers are less likely to file a claim, insurance companies can offer them lower premiums.

But it's not all hopeless for young drivers. Many insurance companies now offer usage-based insurance that tracks the your actual driving behavior and prices the insurance accordingly. If you're prudent but fairly new to driving, look into this option; it might end up saving you a lot (see An Intro to Usage-Based Insurance and Telematics to learn more).

Another way to lower your premium is to complete a driving course from an accredited driving school. Not every state offers this discount, and you might be put off by paying up-front for the course, but learning defensive driving techniques are still worthwhile and could prevent a crash (learn The First Steps You Need to Take After Wrecking Your Car so you know what to do if you're ever in an accident).

Sorry Guys, You Pay More

This one might seem unfair, too. Like age, it's based on statistics: young male drivers have nearly double the rate of accidents causing death compared to female drivers, and more than double the rate of fatal accidents involving alcohol.

Unfortunately, the statistics don't tell us exactly what causes that huge difference in accident rates among genders. So, insurers have to rely on what they can see from the data, and what they see is that young men tend to be riskier drivers.

Your Driving Record Counts

Your driving history has a lot to do with your premiums, too. Insurance underwriters use your driving record to get a sense of your driving ability and level of risk.

Being involved in multiple accidents, especially when you're at fault, will drive up your premium because they indicate you will be more likely to file a claim. The insurance company will also make note of the traffic tickets against your license and take them as a sign that you're a riskier driver.

If your state insists that you get an SR-22, your premiums will definitely increase. An SR-22 is a vehicle liability insurance document that most state Departments of Motor Vehicles (DMVs) require for drivers they deem to be high risk. You'll need an SR-22 if you've had a DUI, a DWI, a serious moving violation, or have had an accident while driving without insurance or a license. You might also need to get one if you've had many traffic offenses or tickets in a short period of time.

The problem with an SR-22 is that you have to get your insurance before the state will let you drive again. Naturally, all insurance companies will look at you as a riskier driver and their rates will reflect this for at least three years.

Make and Model Matter

A lot of people think that a newer car costs more to insure than an older one, but that's not always the case. Insurance companies use a lot of factors to determine your premium, and the make and model of your car have a greater bearing than the year it was manufactured.

Why does make and model matter at all? Well, for one thing, particular models attract particular kinds of drivers. There is a world of difference between someone who decides to buy a minivan and someone who decides to buy a sports car. Even if the sports car is older, insurance companies will deem it a higher risk and the driver might pay more than the driver of a brand new minivan.

Another reason make and model matter is theft. Thieves target some vehicles more often than others, which means insurance companies are more likely to have to pay out a claim for them. And if you think you're in the clear because you don't drive a fancy BMW or a Mercedes, well, think again. The vehicles that are most desirable to thieves are, believe it or not, older Accords, Civics, Camrys, and F-150 pickups (check out this list of most stolen cars to see whether yours is on it).

Safety's another big concern. Newer cars are better at withstanding crashes and have safety features, like passenger air bags, that don't exist in older models. If your car has additional safety features, find out whether your insurance company offers premium discounts for them.

Finally, vehicle repair costs vary. Parts for an older car can be difficult to find and more expensive to replace. Imported cars may cost more to fix than domestics, and luxury car repairs could exceed the cost of a brand new budget car replacement. All of these affect the cost the insurance company has to pay if your vehicle is damaged, so they factor into your insurance rate as well (find out more about How Auto Insurance Companies Value Your Car).

Where You Live Affects Your Premiums

The rate you pay for your insurance also depends on where you live. Some areas are more susceptible to crime and accidents. Port and border cities have the highest incidence of theft. California has the highest rate of theft among states, and Modesto has the highest in the country. If you're lucky, you live in Virginia Beach, Virginia—it boasts the lowest rate of theft in the country.

And it's not just theft; accident and death rates vary by location, too. According to the Insurance Institute for Highway Safety, the District of Columbia has the lowest rate of traffic-related deaths, while Montana has the highest.

You might also take a hit on your premiums if you live in the suburbs, since you have to drive more. More miles means more risk, so if your commute is longer than 50 miles a day, you can expect that to show up in your rate.

Ask Your Insurer About Discounts

With all these factors going into your premium calculations, it might seem like no matter which way you look at it, your insurance will cost you more. Thankfully, insurance companies offer discounts as well.

As we mentioned above, if your car is loaded with safety features, you might be able to score a lower rate, but that's just one discount program you could take advantage of. When you're shopping for the best rate, ask the insurer whether they offer discounts for loyalty or safe driving. Many companies also offer discounts for government employees and members of the military.

It never hurts to ask, and with premium payments adding up over the years, even small savings can make a big difference.