Lifestyle   Money
By Consumer Team | 29 Aug. 2018

How Car Insurance Companies Calculate Your Car Insurance Rates

car insurance rate calculation

The Basics of Car Insurance

Chances are, it’s illegal for you to drive without some form of coverage on your motor vehicle. And if you’re not driving your car, truck or motorcycle, you were probably still required to furnish proof of coverage while it was financed. It’s almost like the banks and government don’t trust you behind the wheel without auto insurance.

You might be wondering why it’s not optional like other forms of coverage, but that’s a question for another article. Here, we’re going to discuss what insurers look for in their clients and why your premium might be a touch higher than you expected. There are several factors that come together to form the final statement, whether you receive it monthly or twice a year.

How Your Car Insurance Premium Is Calculated

Most car insurance companies will take the same variables into consideration whether you’re rolling with Progressive, Allstate, Geico, Liberty Mutual or others. The bottom line for any insurer is that they cover the costs of your mistakes if you have an accident, and that means they have to determine the extent of your liability. If you’re considered a safe driver who limits their time on the road and uses a relatively low-value vehicle, they figure that you’re an inexpensive client to cover.

Here are the main factors to keep in mind when deciding if it’s time to jump to a new company:

1. Driving Record

Naturally, someone who has accumulated no infractions on their license will leave a good impression on insurers. Likewise, accidents and other on-the-road incidents that are legally deemed as your fault will increase your liability, which significantly raises your car insurance price. Bear in mind that parking tickets don’t normally affect car insurance price because they aren’t considered a moving violation.

2. Vehicle

Lower car insurance quotes coincide with vehicles that are less expensive for the auto insurance company to replace or repair. This means that newer models typically cost more to cover, especially if they’re from more expensive brands such as Mercedes or Porsche. It’s worth noting that the color of your vehicle doesn’t actually affect your premium.

3. Annual Mileage

Your car insurance rate will drop if you limit your exposure on the road. The more you drive, the more likely you are to end up in an accident no matter how safe you are. Some companies will let you install a meter in your car that measures your actual time on the road, since it’s entirely possible to tell the car insurance company that you drive less than you actually do.

4. Coverage Gaps

If there are pauses or stutters between two insuring periods, it’s possible that your company will raise your car insurance rate in anticipation of you cancelling your service at some point or otherwise failing to pay it in timely fashion. This is one of those oft-overlooked variables that doesn’t significantly impact your overall premium, but it’s worth mentioning.

5. Universities and Colleges

If you can prove that you’re attending a university or college part- or full-time, you may receive a discount on car insurance quotes. This is because the company expects better driving habits from someone who’s invested in an education, and the more credits you’re taking, the higher the discount.