Understanding Your Auto Insurance Premium


Why all the mystery? Fred and Marcy are right next door and pay less for their auto insurance premiums than me. Why is my rate so much different?

Most people find the process of insurance companies calculating premiums completely random. It is not, I can assure you. Insurance companies spend millions of money calculating and weighing many factors to determine “risk” before assigning a cost.

Knowledge is power. Understanding the factors used by auto insurance companies to determine your rate will give you more control over the premiums that you pay.

You might be charged more if you are a victim of accidents or tickets. Consider yourself a “higher-risk” person. You are considered a “higher risk” even if you didn’t receive points for a ticket. If you’re looking for insurance and have had accidents, ask your company whether they are considered at fault. They will not be counted against you if they are not at fault. If they were at fault, find out how much. It is possible that if your fault was less than 50%, it will still impact the premium but it won’t “surchargeable.” Most companies will also look at how much you have paid to determine if there’s a surcharge.

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This is the most important factor that influences price. Statistics are used by insurance companies to determine which areas are most at risk of “claims.” These include vandalism, grand theft auto, and accidents. Rates in cities will generally be higher than those in the suburbs or surrounding areas. If you live in an area with higher ratings, your Agent can tell you. Move! Perhaps it is time to move!

Price will depend on the type of vehicle that you drive. An expensive sports car is more costly to insure than a smaller family sedan. Due to the higher cost of labor and parts, foreign cars may also have higher premiums. The insurance company will have to pay more if a total loss occurs. In general, the more expensive a car (the actual cash value), the higher the premium. Some models are cheaper to fix in a collision, but have a higher chance of bodily injury. Do your research before you buy your next car. For its Top Safety Picks, check out the Insurance Institute for Highway Safety. The Highway Loss Data Institute, (HLDI), analyzes the costs to insurance companies due to theft and collision claims. The NICB (National Insurance Crime Bureau) will show you the 10 most likely vehicles to be stolen. If your car appears on this list, your premium will reflect the additional “risk.”

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Age is another important factor. Because they are most at risk of being involved in accidents, statistics indicate that drivers under 25 years old will be the most expensive to insure. Many companies offer substantial discounts to students who are good at school and young drivers who have completed driver training programs. Drivers over 50 may be eligible for a discount. However, the rate will increase once you turn seventy-five.

Mileage is another important factor. You are more likely to have an accident if you drive more miles each year. You can combat this problem by walking, biking, using public transport, or pooling your car. These will save you money on insurance, reduce vehicle wear, and save gas money.

As always, trust your insurance agent. They are your best resource for understanding your individual rate.