When insurance companies determine the price of car insurance, they consider multiple factors in their calculation of the final cost. This explains why cars with a similar purchase price may have very different costs when it comes time to stipulate an insurance policy.
If you already own a car and are in the market for a new car or a used car, you might ask your current insurer for estimates for the particular model of car that you have your sights set on. You can also shop around, especially online, to see what the marketplace offers. Shopping around has never been easier.
How do Insurance Companies Decide Prices?
Each company will have its formula for establishing the cost of insuring your vehicle, but there are common factors that most companies will figure into the equation, and they are not limited to the car itself. How much each factor influences the price is at the discretion of the individual company. These factors include
Older drivers will benefit from their age because they are generally much more experienced on the road. Families with teens and young adults under the age of twenty-five will pay more.
If you live in an area where theft rates are higher or accidents are more common, your insurance will cost more. City dwellers tend to pay more than rural residents due to the amount of traffic and time on the road. Also, where you park your car can be factored in. If you have a garage your car will be more protected than if you park on the street.
If your driving record is excellent, it stands to reason that your premium will be lower. If instead, you have been involved in accidents or have been cited with driving violations, you’ll pay more. One speeding ticket or a single DUI will raise the rate. You will also pay more if you are a new driver without any driving record to consider.
- Personal Accident History
If you have been involved in one or more accidents, this will influence your premium cost. The more serious the accident is in terms of vehicle damage or medical harm, the more your costs will increase especially if you are at fault.
The Ladies have an advantage here as they tend to be involved in fewer accidents, or when involved, the accidents may be just fender benders that are not serious. They are pulled over less often for driving under the influence, too.
How often you drive is a major factor. If you drive to work, or if your profession requires you to be on the road a lot or drive long distances, your insurance policy premium will cost significantly more than if you only drive occasionally.
- Credit Insurance Score and Credit History
This is a statistical instrument used by insurance companies to predict how likely it is that you will file a claim and its cost. Bad credit will equate to a rise in your expenses.
The Car to Insure
Some cars are more expensive to insure than others, and this is how the make and model impact insurance costs. Are you insuring an SUV and how much is the insurance on a 4runner? Or have you selected a compact car such as a Mazda 3? How much is the insurance for a Mazda 3 or similar? Insurers will contemplate:
Because insurance companies are liable for compensating you for the value or a portion of the value of your vehicle, the car’s worth will play a significant role. While price will not be the only element evaluated, it can affect the cost of a premium.
Cars differ in how much they cost to repair due to parts and their availability, engine power, and special features or trim. Insurance companies make it their business to know the expense of replacement parts as well as the cost of labor. When these costs rise due to inflation, material availability, or manufacturing expenses, your insurance premium will follow.
Some models of cars will be stolen more frequently. Models that have higher rates of theft will also signify more claims for the insurance company, making them more costly to insure.
How is your car rated when it comes to safety? Car components like roof strength or seats and head restraints will be examined by companies when providing expense estimates, as well as the car’s crash test ratings. Safety features on the car such as a lane keep assist, high beam headlights that are automatic, or a rearview camera may get you a discount.
The price of your insurance will also be determined by the kind of coverage you want and the amount of coverage you want. Beginning with a basic coverage plan, you may add on other policy options like personal injury protection, collision damage, bodily injury, property damage, or medical payment coverage.
Some options may be required depending on where you reside, while others will be optional. Your insurance deductible will also figure into the final cost. There will be a considerable difference in price between a liability-only policy and one that offers you full coverage.
Always Get an Estimate
If you are planning on purchasing a new car, think about getting an estimate, if not several, for the car model you have selected before you buy. This will allow you to evaluate the monthly expenses relative to your choice of transportation. Less expensive autos are not synonymous with lower insurance premiums because the cost of the car is not the only factor determining an insurance premium. Your best option is shopping around.