Glossary

Territory rating

Pricing based on where a car is garaged, with each area assigned a factor that reflects its local claim costs.

Also called: rating territory, ZIP code rating, territorial rating

Territory rating is how insurers price location. They divide a state into rating territories, typically groups of ZIP codes, counties or smaller geographic units, and assign each one a factor based on claims experience there. Your territory is set by your garaging address, where the car is kept overnight, not where you work or drive most.

Territory factors reflect how often claims happen in an area and how much they cost: traffic density, crash rates, theft and vandalism, weather such as hail or flooding, repair and medical costs, how often claims end up in court, and the share of uninsured drivers. Example: with a $600 statewide base rate for a coverage, a rural territory with a 0.80 factor pays $480, while a dense urban territory with a 1.45 factor pays $870, before any personal factors (hypothetical figures). Moving across town can noticeably change your premium.

States regulate how location is used. Insurers must file their territory definitions and factors, and some states limit how much weight location can carry. Under California's Proposition 103, optional factors such as location may not outweigh the three mandatory factors of driving record, mileage and experience. Listing a false garaging address to get a cheaper territory is premium fraud. See Why your ZIP code changes your car insurance price and rating factors.

Last reviewed October 4, 2026

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Related terms

Garaging address The address where a car is mainly parked overnight, which insurers use to price a policy and which must be reported accurately. Rating factors The characteristics insurers use to price a policy, such as driving record, location, vehicle, mileage and, where allowed, age and credit. Insurance rate The price per unit of coverage an insurer files with the state, which rating factors then adjust to produce your individual premium. Premium The amount you pay for an insurance policy over its term, built from the insurer's rate, your rating factors, coverage choices and discounts. Credit-based insurance score A score built from parts of your credit report to predict how likely you are to file insurance claims, used in pricing where state law allows.

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