How are Car Insurance Premiums Calculated?
To calculate your car insurance premium, your insurance company follows an intricate algorithm that takes many variables into account.
Not only are they looking at your car, but also they are looking at who you are and what your driving says about you.
If you are wondering why your premium is so high or are wanting to find ways to lower your monthly premium, take these four major parts of the algorithm into account.
How Easily Can Your Car Be Stolen?
While you surely know that the insurance company looks at how new your car is and how much it is worth, you may not be aware that they also look at other facets of your car, such as how flashy it is and how easily it can be stolen.
If your car is stolen, your insurance company may be partially responsible financially.
Therefore, your premium may be higher if you drive some of the most frequently stolen cars, including Honda Accords, Honda Civics and Ford pickups.
How Easily Can Your Car Be Repaired?
If you are in an accident, your insurance company will be paying for any repairs needed to your vehicle.
Thus, they will be looking at how easily your car can be repaired, how expensive new parts are and how readily available these new parts are as well.
What Type of Policy Do You Have?
Of course, a major part of determining your car insurance premium is looking at the type of coverage chosen as well as your desired deductible.
The more that you agree to pay in your annual deductible, the lower your premium will be.
You will want to look at your level of insurance coverage for liability as well as for comprehensive coverage.
You should also look at any discounts that you may be able to snag for bundling different types of insurance with one company.
How Clean is Your Driving Record?
Staying crash-free and safe on the road can equal lower premiums for you because your insurance company will see you as less of a risk.
Keep in mind that even if your driving record is not squeaky clean right now, you can spiff it up by remaining crash-free and ticket-free for several more years.
These are the four main pieces used for determining your car insurance premium.
However, there are several other factors that your insurance company may also look at, including your age, gender, credit report and typical driving distance per year.
The company may also look at where you live and whether you drive mainly for business or pleasure.
Category: Insurance
