What Factors Are Used to Calculate Auto Insurance?

Car insurance is a legal requirement in almost every state. Other states may not legally require it but may need the drivers to prove they can afford to pay for damages should an accident occur due to their fault.

You do not only need car insurance to be law-compliant, but also to protect yourself, others, and your car. It will also save you time and resources in case of a fallout from a car accident.  Buying a  cheap car insurance policy is more effective than the tedious and expensive process you will have to go through when you don’t have it.

There are factors used to calculate the cost of your auto insurance. Most of these rates are in your control, while some you may not control. It is essential to know what affects your insurance rate to determine which policy suits you. It will also be helpful to lower your expenses for the insurance plan.

A two vehicle car crash in need of car insurance repair in a city area.
Car crash in need of car insurance repair | Getty Images

Theft Statistics in Your Area

According to Pawson, Car insurers calculate their rates based on the risks in the locations they operate. A high risk of theft in an area leads to an increased insurance rate. It would be best to bump up the insurance premium since policyholders in such regions are more likely to fall victim to theft. Calculations based on theft also depend on the model of your car since some models present a higher risk of theft.

Driving Record

According to Bankrate, it is the simplest rating factor that insurers use. Your drivers’ past offers insights into the kind of person you are and your future performance. If you have several tickets and violations on your record, it may add up and inflate your insurance premiums. The only way to maintain a clean driving record is to drive carefully.

Age and Gender

Insurance companies also use age and gender when assessing driver’s risks while driving in particular locations. According to Insurance Information Institute, younger drivers may need to pay more insurance premiums because they have less experience and a higher chance of causing accidents. In terms of gender, male car owners have a higher likelihood of getting into accidents and tend to spend more on insurance than female car owners.

How Often You Use the Car

Insurers want to know how much you drive. If you often have to travel long distances to work, you are likely to pay more in insurance compared to someone who only goes out once in a while.

Car Safety Features

Insurance rates are also lower for vehicles with higher safety features that reduce the risk of accidents and protect you from injury. Safety features such as airbags, traction control, and automatic seat belts reduce the chances of getting involved in an accident. For example, the safety features on Tesla Model 3 lower its insurance costs compared to other cars in its class.

Type of Insurance Coverage

When determining the most appropriate insurance coverage, you can choose from options based on limits and deductibles. Most auto insurance requirements involve liability coverage that you also need to service. Standard cover included in car insurance includes collision coverage, comprehensive coverage, medical payments, and personal injury protection.

Find out more about the most appropriate cover for you by talking to your agent. Also, inquire into the limits and deductibles which are right for you. It helps to identify discounts to lower the costs further.

Paying your car insurance is a significant part of owning a car. You can lower the costs and make the insurance beneficial yet cheap. It would be best to check for insurance companies that offer discounts to their customers.

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