| Understanding How Insurers Determine Your Car Insurance Rates |
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| Written by John Gaddy |
| Thursday, 07 January 2010 16:22 |
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You just purchased a new car, and now you're in the market for budget car insurance. Once you give an insurance company with some basic information, including the car model, your age, your address, etc., they supply you a monthly premium quote. But how exactly do they calculate that number?
You just purchased a new car, and now you're in the market for budget car insurance. Once you give an insurance company with some basic information, including the car model, your age, your address, etc., they supply you a monthly premium quote. But how exactly do they calculate that number? Continue reading to understand how insurers determine your rate and how you can save premium dollars by shopping your coverage. Different companies, different rates Many vehicle owners falsely believe insurance rates are set by their state's department of insurance. While it's true that auto insurers must follow certain laws when calculating rates, the rates themselves are established by law. When you request a quote, the insurer reviews several factors as they determine your rate. However, since each company utilizes their own unique calculation method, you're likely to receive widely varying rates from different insurance providers. Number crunching Depending on the laws in your state, insurance companies typically determine your rate based on some or all of the following factors: * The year, model, body type, engine size and safety features of your vehicle * Your age, gender and marital status * Your personal credit history * Your driving record * Expected usage of the car (such as if you are using the car for commuting to and from work, pleasure or as a collectible.) * Home ownership status and occupation * Number of drivers that will be using the car and their ages * Number of vehicles you own * Requested coverage limits * Where you reside * Assumed weekly, monthly or annual mileage Normally, your agent will key each of these items into a computer. The software automatically places you into a rate group based on your answers. The insurer then subtracts any discounts for which you are eligible and you're left with the resulting quote. Where your money goes If you elect to purchase a policy with the company, you'll begin paying a monthly premium. But what exactly does your monthly premium cover? Here's a typical insurance premium breakdown: * Approximately 70 percent pays for claims and associated expenses * About 26 percent of your premium covers marketing, agent commissions and administrative costs * And 4 percent of your premium contributes to the insurer's bottom line You should shop around Each insurer has unique sets of claim payments and expenses, and they set rates for each "price group" accordingly. That's why you'll likely receive varying quotes from each insurance company. This underscores why it's so important to take the time to shop around and find the best rate. Plus, while insurance companies are prohibited by law to calculate rates based on race and religion, they are allowed to consider your age, gender and marital status. However, each company places emphasis on different factors. For example, while one insurance company may place more weight on a driver's gender, another company may think their driving record is more important. This is yet another reason to request numerous quotes before you settle on a particular company. Besides the rate, you should also consider which company offers the type of coverage you need. Do your homework and locate the best fit for your unique auto insurance needs. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. If you're looking for instant car insurance quotes or just a simple auto insurance quote comparison drop by 123insurancequotes.net today for more details. Save money in 60 seconds or less with our simple quoting software. |