How Auto Insurance Premiums are Calculated

You get the car insurance bill each month and pay it on time like a good policy holder. But do you really know where your premium dollars are going? Below are some of the biggest factors that affect your auto insurance premiums.

Vehicle Type- The type of car you drive will greatly affect your auto insurance premiums. For example, you may pay lower car insurance premiums than another comparable driver if your vehicle is less prone to theft, if it holds a higher safety rating and if the value is lower. This type of vehicle is less risky to insure and less expensive to repair/replace in the event a claim is filed.

Coverage- There are many different types of auto insurance coverage ranging from basic liability coverage to the most comprehensive collision package. As you can guess, the more coverage you have the higher your premiums.

Driving Record- Car insurance companies will also take your driving record into consideration. If you have a history of tickets, accidents or especially major violations- you may pay much higher rates than a driver who has a clean record.

Insurance Score- Every insurance company also considers a policy holder’s credit-based insurance score when determining what premiums you will pay. Basically, your credit score and payment history is taken into account and customers with a better credit rating will be rewarded with lower rates.

Discounts- If you qualify for certain auto insurance discounts you may pay lower insurance rates. Discounts range from vehicle safety discounts to discounts for members of the military. When comparing quotes make sure you take discounts into consideration.

Your State of Residency- The state you live in will also affect your rates. Not only does each State Department of Insurance determine what insurance companies can and cannot charge for auto insurance, but they also determine minimum coverage amounts that all drivers must carry.