How Are Car Insurance Costs Calculated

What will effect the cost of your car insurance?

Put simply, the price you pay is determined by the type of cover you need (e.g. fully comprehensive cover versus third party) and how often and how much car insurers expect you to claim on your policy.

To work out the likelihood of you making a claim insurers will look at details about you and your car, and these details can greatly affect the amount you will need to pay for car insurance. Below are the key factors that car insurers use to determine the cost of your insurance premium:

About your car:

Car Value - The more expensive your car is the more expensive it will be to replace (and typically, the more expensive it will be to fix too). So, the higher the cost of the car, the more you can expect to pay for your insurance.

Where You Live - As a rule of thumb, built up urban areas are likely to have more traffic on the road (increasing the likelihood of an accident) and more car theft and so living in such areas will increase the amount you will need to pay for insurance.

Car usage and storage:

Your Claim History - Insurers believe that if you have claimed in the past you are more likely to claim again. Most insurers will offer a no claims bonus which can significantly reduce the cost of your insurance.

Whilst insurance companies vary their rates to compete with other insurance companies, they also vary their rates based on their assessment of the risk posed by a particular driver driving a particular car. They do this because there is no point in buying business with low car insurance rates and then insuring high risk drivers at these rates. This is a recipe for losing money.

So, if you lower your risk, you lower your car insurance. How do youlower your risk? Well there's a number of ways that your own driving and car behaviour can affect your car insurance rates.

Ways on How to Save on Car Insurance

Did you know that owning a car is not cheap? You don't simply drive it and pay for gas? No, owning a car is expensive. There are many reasons why and insurance is one of them. So, before you buy a car, think about car insurance. Auto insurance is mandated by law. If you drive your car, make sure you carry the required insurance policy on it. Cheap car insurance may suffice minimum state requirements. But don't be too quick in getting cheap insurance.

How do you choose your car insurance policy?

1. Choose the appropriate car. Insurance companies assign values to cars, and different cars have different values that would affect the cost of insurance. Insurers are most likely to look at the cost of repairs if the car gets into trouble. If your car is expensive, repairs for it will likely be expensive too. Hence, these firms will assign a high cost on your car. Before you buy a new car, think about how possibly its price will affect its insurance.

2. How often do you drive? If you stay in your office 8 hours a day, chances are you only drive to work and back home. There is not too much mileage there. Insurers look at you as a candidate for cheap auto insurance, because they will not likely spend for your car repairs because the less you drive your car, the smaller your chances of getting involved in a car accident. 

It takes a while before you can earn the reputation of a good driver. First time drivers would have to contend with high premiums for their car insurance. If you want nice auto insurance deals in the future, drive in such a way that you will not end up being chased by the cops on the road. 

Why Comparing Car Insurance Is Important

Comparing car insurance policies online while buying a new policy or renewing an existing one is an absolute must task. If you care about your car and money which we are sure you do, then you should definitely do your homework before buying your car insurance. With the presence of multiple insurance providers, buying car insurance may be more confusing than convenient for you. The easiest way to get the best deal for your car insurance is by comparing it. You should compare car insurance due to the following factors:

Save on Premium Rates

Every insurance company has a different pricing policy and different base plans because of which your final insurance quote will look different from different insurers. This not only depends on the name, age and model of your car, but also on the various components of the insurance policy, the base rate and pricing structure of the company. Thus, you ought to compare car insurance from different insurance companies to get an idea of the industry rates. This will allow you to pick up the insurer who is offering you the best premium policy at the lowest price.

Power of Choice

Online comparison empowers you to vary some of your key inputs and calculate the premium cost almost instantly. These key inputs, in the case of car insurance, are Insured Declared Value and voluntary deductibles. Both these factors have a significant impact on your car insurance premium. Higher the IDV and lower the voluntary deductible, higher will be your premium amount. Thus, you can weigh the two and set them as per your needs and requirements. An online comparison allows you to customize each one of them and see their individual effect.

Add-On Covers

Car Insurance add-on covers are very powerful and can help you get the best policy at a reasonable price. In case you do not know which cover is the best for your car, you can compare it on online aggregator's website and get a detailed idea about each one of them. Not all companies offer the same set of add-ons; hence you can compare it for multiple companies and select the one that best matches your requirements.

Discounts and Other Offers

Most of the companies give attractive discounts on car insurance in view of attracting new customers and beat the competition. You can easily get an idea of the discount offered by each company and their terms and conditions therein. When you compare the car insurance, you will come to know which policy gives you the maximum discount for your car. Everybody loves the discount, but it is important that you do not miss on the key features of the policy in lieu of a discount.

Not everyone's insurance needs are the same. Some families own two or three very expensive vehicles, while other families own only older used cars. Some people are members of AAA, while others are not. The specific terms of a policy should be determined by your life situation and the value of the items being insured.

#3 - How to Become Highly InsurableWhether you've already purchased car insurance, or you are getting ready to start looking, one of the best things you can do to obtain the lowest possible rates is to improve those things that car insurance companies look at when they calculate your insurance premium. There are several things you can do in the short term to improve your insurability standing, and there are also things you can do over the long term to improve it as well. This section will describe four major elements of this technique to save money on your car insurance. 

#4 - Reduce Your Car's Insurance RateAnother extremely effective technique to obtain the lowest possible insurance rate is to improve those things about your car which car insurance companies value the most when they calculate your insurance premium. There are several things that you can do before buying a car that will dramatically decrease your insurance premium. If you've already bought a car, however, and are looking for ways to decrease your existing insurance costs, there are still methods you can use that will substantially cut your premium costs. 

For example, the damages in an accident that was your fault may total $25,000. If you only have $20,000 in coverage you will be held liable for the other $5,000.

Another reason why you need car insurance is because you can protect your vehicle against damage inflicted beyond your control. For instance, a hail storm may cause thousands of dollars in damages. You can make a claim to your insurance company and have the repairs paid for. Without insurance you would have to pay for the damages out of your pocket. 

Lastly, not having car insurance can result in the loss of your license. If you are pulled over for speeding or another traffic offense and can't provide proof of insurance, this secondary offense can cause your license to be suspended.

Understanding affordable car insurance

When you are buying affordable car insurance you have to understand it. First, you have what is called a deductible. This is how much money you are willing to pay out of pocket in the case of an accident. There are times when the deductible may need to be paid and times when it may not need to be paid. If you are involved in an accident that is not your fault, you will not have to pay your deductible because the other party's insurance will pay for it. If you drive into your garage door and damage your car, then you will need to pay your deductible when you make a claim.

There are different levels of deductibles that you can opt for. Know, however, that the higher the deductible the lower your insurance premium is going to be. If you choose a $500 deductible, your premium is going to cost more than if you had a $1,000 deductible. Just make sure your deductible is one that you can afford if the unexpected were to happen.

Another item you must be aware of is the fact you must ensure you have enough coverage in the various areas of your policy. For instance, your policy has bodily injury coverage. This means that you are compensating the injured party for their bodily injury up to a certain amount. Keep in mind that medical expenses are very high. If you opt for $15,000 in bodily injury coverage (the minimum in some states), know that many times medical costs can exceed this depending on the severity of the injury.