How Car Insurance Premiums are Calculated

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Auto insurance providers take several different factors into consideration when calculating the rates for your insurance policy. These rates may be different for different people because of these factors and each insurance policy is therefore different. This article will discuss how the following factors are used to determine how much your car insurance premiums will cost:

* Your driving record

* The vehicle you drive

* Where you live

* Safety features included in your vehicle

* How you use the vehicle

* The type of coverage you have

* Discounts that could apply to you


Your record of driving is one of the most important factors that insurance providers consider when calculating your insurance rates. If you have a clean record with no accidents, you will get a better rate than a person who has several accidents on his/her record. Your company may have a forgiveness policy in place for the first accident, so this will not count against you as long as you remain with this company. if you switch insurance companies, though, the accident does come into play and will result in a higher rate for car insurance.

If you have received any speeding tickets in the past year, this also affects the rate of insurance because you will be deemed as being a poor risk with the increased likelihood of causing an accident due to your poor driving habits.

Inexperienced drivers, such as those who have recently obtained a driver’s licence, pay a higher rate because of the lack of a driving record. This also applies to those obtaining auto insurance in their own name for the first time, no matter how long they have had their driver’s licence.


The type of vehicle you drive has an effect on your cost of auto insurance. Some vehicles are more prone to theft than others. If you are curious about where your vehicle lies in such statistics, you can consult with the list of most popular autos for thieves in your state or province. Just because your car may be small and inexpensive does not mean it will not be a target for thieves. Larger vehicles and more expensive cars are not necessarily high on this list. The insurance company looks at the statistics of auto theft according to the ones that are the most popular for ease of breaking into and even the color of the vehicle can play a part in this.

The cost of repairs to the vehicle comes into play when determining this aspect of calculating your insurance rates. More expensive and foreign automobiles are more expensive to repair and replace and this will place you in a higher category when it comes to taking out insurance.


Drivers in cities are at a higher risk of being involved in an auto accident that causes extensive damage and injury to passengers. Therefore, living and driving in a city means that your insurance rates will be higher. Even if you do live in a rural area that is associated with a metropolitan area, your insurance rates may be calculated on the statistics of that city.


Most new makes and models of vehicle do have all the modern safety features, such as seat belts, anti-theft devices and air bags. If you have an older make auto, you can save money on your car insurance by having these features installed. It is only the initial cost of the installation that can save you money year after year on your premiums.


It costs more in auto insurance if you drive your vehicle to work each day. This is because you are on the highway during rush hour traffic and as such are at an increased risk of being involved in an accident. If you work in the city, then you also have to have parking during the day, which puts it at risk of vandalism or theft because it is unattended for long periods of time.


The amount and type of coverage you have on the vehicle will impact your cost of insurance. There is an amount for which you are responsible for paying when you make a claim called a deductible. Bu going with the standard deductible, rather than choosing a higher amount, you will pay a higher premium because the insurance company is assuming more risk.

On an older vehicle you can save money by having only public liability which covers the other vehicle and the passengers if you are at fault in an accident. This is a much cheaper policy, but it also means you will not receive any money for injuries or damage sustained to your vehicle.

Fire and theft are common types of coverage in auto insurance. You can also have insurance for glass breakage included at an extra cost if you wish.

You have two options with regards to the insurance on the value of the vehicle – actual cash value and replacement cost. Actual cash value means that if your vehicle is a total loss in an accident, the value is subject to depreciation over the length of time you have owned the vehicle. This means that you will only get the book value, which may not be enough to pay off the money that you still owe on the loan. Replacement value is a more expensive option, but it means that if the auto is a total loss you will receive the amount of money you need to purchase this type of vehicle again.


Most insurance companies have various types of discounts available in auto insurance policies. For example, there is an age discount for those aged 55 years and over. Good students who maintain an A average in school will also get a lower rate because they are seen as being more responsible. If you have your home and all your vehicles insured with the same company, this will also qualify you for a discount.


It is important that you shop around for auto insurance to get the best coverage at the most competitive price. Don’t be afraid to ask questions and always make sure you read the fine print.


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