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How your car insurance premium is calculated

There are a lot of factors which are involved when calculating your car insurance costs, our car insurance calculator can only make an estimate based on common criteria such as age, gender, location, etc. To get the most accurate estimate we recommend going right to the source and comparing insurance companies offerings. You can check out our easy to use auto insurance quotes tool to see what you can expect to pay.First question we get a lot is: Who has the cheapest auto insurance? We don’t know! It depends. There’s a great article on Autoinsurancemonkey.com we recommend having a quick read.

Some of the criteria used to calculate the cost of car insurance:

Your age: Sorry to say, but young driver can expect to pay much more for insurance. Young drivers are more prone to accidents and reckless driving (Statistically speaking), therefore insurers require a substantially higher premium from people between the ages of 16 to 26. Your age is one of the biggest factors affecting the amount you pay for insurance, and unfortunately there is not much you can do about your age.

Gender: Men are going to pay more for auto insurance. Men are more likely to speed, drink and drive, drive recklessly and even less likely to wear a seat-belt. Just like your age, there’s not much you can do about your gender, so unfortunately for all the responsible safe driving men out there you’re paying extra because of a few bad apples.

Your Vehicle: The type of car you drive will affect your insurance premiums. Some of the factors which determine your insurance premium are:

Model of your car: Driving an SUV or truck will cost you more then driving a smaller model of car. Some car’s are also more prone to theft in certain states/cities, if your car is on a insurance companies list of cars which has a low rate of theft you will pay less for insurance. Here’s a list of the most stolen cars of 2012, as compiled by Forbes.

Engine Size: Cars with a bigger engines have more power. The more powerful your car the faster it is and the more likely you will be involved in accidents. This is why larger cars generally require larger insurance premiums, while smaller cars with less powerful engines will end up paying less.

Value of your car: The more expensive your car the more your car insurance premium will be. More expensive cars have higher costs of repair because there is less specialized repair shops, harder to acquire broken parts and because pricier car’s generally have the two factors mentioned above against them ( More powerful engine, More likely to be stolen,etc)

Your location: If you live in an area with higher crime rates, expect to pay more for insurance. If you live in a city, expect to pay more then you would if you lived in a rural area. Living in the city drastically increases the chance of vehicle theft and accidents.

Your Driving record: If you have had a DUI, speeding tickets or been fined/convicted for reckless driving you can expect to pay more for insurance.

 

How to save money on car insurance

Now that you know how your car insurance is calculated lets see what you can do to reduce the cost as much as possible. Here’s a few tips I recommend to everyone trying to lower their insurance cost, some of these tips might be applicable to you, some might not be.

1) Increase your risk, lower your insurers risk. If you have an inexpensive car and would rather pay for repairs out of pocket then dropping your collision insurance would be a smart thing to do. Collision insurance is unnecessary especially if your car is older or cheaper ( Under $5,000). If you have a new, or expensive car raising your deductible is one way to lower your insurance cost. By raising your deductible you increase your risk, but lower it for your insurer. In the long run a safe driver will save more money this way because they will pay less for insurance. Deductibles are usually set around $500-1000, by raising your deductible to $1000-2000 you can expect much cheaper insurance costs.

2) Ask for a discount. Many insurance companies have discounts available, even if they might not be openly advertised. If you don’t drive often you might be able to qualify for a low-mileage discount. There are tons of discounts available, all you need to do is ask.

3) Bundle your insurance. Insuring your house, car, healthcare with one provider will lower you insurance premiums immensely. Not only does bundling your insurance lower the cost for you, it gives you more sway when asking for discounts/help from insurance companies since you are heavily invested with them.

4) Improve you driving. I’m sure you a great driver, but insurance companies are untrustworthy fellows so we need to show them. One way to show your dedication and skill to safe driving is by taking a defensive driving course. Defensive driving courses are offered in many states and insurance companies are known to give discounts for participants, I recommend you call and ask the insurance company if they will offer you a discount ( some do, some don’t). Taking a defensive driving course might cost you a few hundreds dollars, but it will save you much more money long term, plus you might learn a thing or two.

5) Shop around. There’s lots of insurance companies, which means there is lot’s a variety in the pricing and offerings. The more companies you compare the more likely you are to get more bang for you buck. Use our auto insurance quotes calculator and our insurance search above to compare dozens of insurance companies.