If you just bought a new car, your first step before taking it out for a spin is to get insurance on it. For those of you who have worked with car insurance before, you probably have a general idea of how your rates are calculated. Short of using a car insurance calculator, how do insurance companies sort out your specific rate? Today, you will learn about the how and why of what you pay the insurance company.
Car Insurance Calculator – How it’s calculated
As you might imagine, a car insurance estimator starts off by weighing your chosen coverage range, your limits, and your deductibles. These determine the base rate that you will be paying. In addition to these, there are certain other elements that a car insurance cost calculator will give preference to over the rest when calculating your premiums.
- Driving record
An insurance policy is made to protect you from costs during an accident, regardless of who caused it. If your driving record shows that you are a risky driver who is likely to get in collisions more often than other people, you should expect a higher rate. This is pretty obvious, of course. Your insurer will check how likely you are to get in an accident and add or deduct from your base rate based on the results.
This likelihood is increased by more frequent black marks on your record. If, for example, you have been in collisions (multiple) in the past months, there is a statistically higher chance of being involved in one in the future too. Any auto insurance calculator will factor this into the equation.
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- Your age and other personal factors
Have you ever been asked for some pretty personal information when trying to get an estimate of your premium? These are necessary for the insurer to determine how likely you are to collide with something. According to most insurers, the likelihood of getting into an accident reduces with driving experience. This is why age is a factor.
Your gender also matters. This may offend you, but the truth is statistics have shown that men take far more risks while driving than women, which makes the rate go up for a male driver. If you are married, though, your rate will immediately go down. All these personal factors can be negated if you have a pristine driving record, of course, as the highest preference is given to this by any car insurance estimator.
- Where your home is
This is a key factor in any car insurance calculator regardless of insurer. While accidents are often unforeseen, locations with more traffic and auto crime rates will obviously have a higher risk of something going wrong. If your address is in the city, your rates will be higher than if you lived in the countryside.
While all of the above factors are used to calculate your rate, each insurer has a different algorithm for calculating it. This is why working with a generic car insurance cost calculator is almost impossible to do. For the most accurate estimate of your premium, always request a quote directly from your chosen insurer.
Other Factors Affecting Your Rates
Outside the key factors mentioned above, there are other things that car insurance estimators use to determine your premium. While these don’t affect the rate as much as the rest, it is still important that you know them when applying for insurance.
- Your car
Different makes and models of vehicle score differently in safety tests at the manufacturer. The safer a car is, the lower your premium will be. Depending on the type of insurance you get, you can also reduce other costs too, simply by getting a cheaper car.
- Credit score
Your credit score won’t always be asked for, but if it is, watch out! Most insurance cost calculators determine how responsible someone is by analyzing how good their credit score is.
- Your coverage
The type of coverage you get will affect the cost of insurance. If you have full coverage insurance you’ll pay more than if you get basic insurance, for example.
Your Premiums Vary By State
Each state has different rules concerning how their insurance companies’ premiums are calculated. For example, some states ban the use of some of the above factors when calculating premiums. Others allow them to be used.
Therefore, your premium could be higher in one state than another for the exact same person with the same personal information. Sometimes your primary elements will be shifted to secondary rating factors. When using a car insurance calculator, make sure you use one that is provided by the insurance company for that state.
Insurance Companies Vary Their Calculators
Each insurance company has a different set of calculations that they base their rates on. In addition to this, insurers take their own history into account. The formula is varied for each company, which means that your insurance rate could change significantly based on the company you select. This is one of the biggest reasons why you have to shop around and get insurance quotes from a number of different companies before settling on one. Who has the cheapest auto insurance is impossible to say, since every company calculates rates differently.
Don’t Trust the Estimates of Others
Does your neighbor have insurance that pays really well for a car similar to your own? Don’t rush into an insurance policy because you expect to get the same rate for your insurance that they do. If there is one thing you must keep reminding yourself, it is that the insurance rate changes based on the smallest of factors. No two people will have the same rate, because no two people are exactly the same.
You must always request a car insurance quote before you sign a contract that might be doing more harm than good in the long run. There are many great insurance companies out there that could save you a lot of money on your insurance if you just take the time to shop around. Remember never to trust the quotes of others – request your quotes directly from the insurance company. Working with each company directly allows you to gain a better understanding of what you will be paying, not everyone else.