How Does a Car Insurance Company Calculate My Auto Insurance Premium?

When searching for car or auto insurance there are several things that can affect the rate of your insurance policy. Some of the factors that affect your yearly insurance premium are in your control, and others are not. The make and model of the card that you drive, and your driving record itself are two things that you have control over whereas your location and occupation are two other important things about you that can lead to a lower or higher car insurance premium.

The make and model of your car

One of the simplest ways to get cheaper car insurance is by having a different make and model car, truck, or SUV than what you currently drive. The make and model of your car help to determine the risk that an insurance company takes when they cover you. For instance, people who drive a car will be more likely to have more safety features than if they drive a truck. Two cars of the same model but from a different year may also come with different auto insurance rates because one may have more safety features or on the flip side have had a recall.

The importance of having a clean driving record

One of the few things that you have control over is your driving record. Your driving record plays a major roll when it comes to determining the auto insurance rate and a good driving record can lead to a low car insurance premium. Having speeding tickets or a history of getting into car accidents means that you will be a higher risk of getting into a car accident again in the future, and you will end up paying more for your car insurance.

Location, location, location

Whether they'd like to admit it or not, insurance companies use your address as a means of determining just how much you will pay for your car insurance. Different states have different laws about car insurance, and living in a particular state may be a benefit or a hindrance when it comes time to pay your premium. The zip code of where you live and the immediate area around it is then used to calculate the average amount of accidents in a year where you live. If you live in an area where there is a high rate of car accidents or crime you may also end up paying a higher car insurance rate. Likewise if you live in an area where there are a low amount of yearly accidents and there is a low crime rate, you may receive a discount off of your yearly car insurance premium.

Your occupation

Believe it or not, the occupation for which you work in can have an affect on the amount you pay for car insurance. The reasoning is simple. It is all about risk. A small business owner or anyone who has a job where they are more likely to be on the road more often and be on a cell phone while driving will end up paying more for their car insurance. People who are retired, unemployed, or work from home can all be eligible for discounts off of their insurance rates because they drive less often and are considered to be less risk to the insurance company.

The make and model of your car, your driving record, where you live, and what you do for a living are all important factors that are used by car insurance companies to determine the rate of your insurance premium. By knowing and understanding how car insurance companies charge for their services, you can be able to use their guidelines to your advantage and receive a lower insurance rate.