How are Car Insurance Costs Calculated?

Simply put, the type of coverage you require (e.g. Third-party coverage versus fully comprehensive and the frequency of how much you’re expecting to receive coverage from your auto insurance provider.

To determine the possibility of filing claims, insurance companies will look over your personal information and your car. The details you provide can have a major impact on the price of your car insurance. These are the most important aspects that insurers take into account in determining the cost of your insurance cost.

About your vehicle

Car Value – The more expensive your vehicle is, the more expensive it will cost to replace (and typically the more costly it is to repair as well). Therefore, the greater the price of your car, the more you can expect to pay for insurance.
Car Power – The more powerful and speedier your car is, the more likely you will be involved in an accident. This will increase the chances of you both making a claim and also the value of the claim. As such, more powerful cars usually have higher premiums.
Car Desirability – The more desirable your car is, the more likely it is that it will be stolen. Replacing a stolen car is a major expense for the insurer and so this risk will be reflected in a higher premium. For example, premiums for old cars could be higher than the norm.

About you:

Your Age – Younger drivers are statistically more likely of being involved in a car crash and so will have the highest insurance premiums (the 17-25 age group usually has the highest rates)
Your Job Some professions are considered to be high risk people (e.g. students, journalists, actors etc.) This will affect the cost of insurance.
Where You Live – As an average, built up urban areas will likely to have higher vehicles on the roads (increasing the risk of having an accident) and more car theft , so residents living in such areas are likely to raise the amount you need to cover insurance.

Storage and car use:

Your Claim History Insurance companies believe that if you have previously claimed, it is more likely that you will make a claim once more. A lot of insurers offer a no-claim bonus that can help reduce your insurance costs.
Previous Penalty Points – Insurance companies will consider this to be a sign that you are a high risk driver and will show this by charging you more for insurance than drivers with clear licenses.
Garage Storage The storage of your vehicle in a garage rather than in the street can reduce the risk of theft and reduce your insurance premium. This is especially important when your car is taken more often than it is.
Mileage – The more you drive, the more you are likely to be involved in an accident so higher mileage policies are likely to be more expensive.

Type of cover

Third Party Vs Third Party Fire and Theft vs Fully Comprehensive – The level of cover you require is among the most evident factors that determine how much insurance going to cost you.

Voluntary Excess If you are willing to pay for the initial costs of your future claims, this can lower the amount of claims that you are likely to make and also the cost of these claims to the insurer. Therefore, insurers will lower their premiums.

There are a few things you cannot alter (like your age) However, other factors such as how you keep your car as well as how careful you drive, and the kind of vehicle you purchase can all have a significant impact on the cost of insurance.

5 Tips to Lower Your Car Insurance Costs

1. Take a look around

A lot of people use the internet to find bargains on electronics, clothing, and other daily purchases. You can apply the same approach to insurance for your car.

You can save money by comparing rates among different auto insurance companies regardless of whether you’re purchasing insurance for the first time or second time.

Insurance rates for car insurance vary between different companies. This means that you might not save as much cash if you don’t compare. The industry-backed Insurance Information Institute suggests obtaining quotes from at least three insurers in order to compare car insurance costs and coverage.

Make sure you compare the same policy coverage and limits to ensure an apples-to-apples price comparision

2. Check Your Deductibles

Rebekah Nelson spokesperson for USAA suggests taking a look at the deductibles that are attached to your current insurance to determine if you can increase them.

Nelson suggests that if haven’t had the opportunity to do it for some time, a higher deductible may be more appropriate and lower your rate.

A car insurance deductible is the amount that is taken out of your insurance payout when you file a comprehensive or collision insurance claim. When you purchase a insurance policy, you select the amount of the deductible. It is also possible to adjust your deductible later if you change your mind. Higher deductibles mean you will pay a lower cost. This is due to the fact that you’ll be responsible for more expenses in the event of filing an insurance claim. It is also less likely to claim for minor damages, as the repair costs are not more than your deductible.

The Insurance Information Institute says raising your deductible from $200 to $500 could reduce the cost of collision and comprehensive coverage by between 15% and 30 percent. A higher deductible, such as $1,000, can result in savings of as much as 40%..

The institute further suggests that in the event that you raise your deductible, save enough cash to cover the possibility of filing a car insurance claim. Let’s say, for instance, a $5,000 claim payout due to a car accident and a $1,000 deductible. The insurance company will pay $4,000, so you’re responsible for $1000 in expenses out of pocket to repair your vehicle damage.

3. Bundle Insurance Policies

Many TV commercials offer the possibility of bundling insurance for home and auto. Insurance companies often offer discounts for policyholders who own both homeowners and auto insurance. Bundling can also be used to cover other types of insurance, such as boat and motorcycle insurance.

Generally, a discount for bundling (also known as multi-policy discount) can reap savings of anywhere from 5% to 25 percent.

In addition to earning a discount from bundling and purchasing more than two policies from one company “also simplifies your insurance, as you have it with only one insurance company,” Nelson points out.

4. Explore Car Insurance Discounts

Auto insurance companies provide numerous discounts apart from bundling discounts. The most popular discounts include:

Multi-car discount. Savings up to 25% could be achieved by insuring multiple vehicles with the same insurer.
Vehicle safety discount. If your vehicle is fitted with the most recent safety features, such as air bags and anti-lock brakes, you might qualify for discounts.
New car discount. Do you own a vehicle that is less than 3 years old? You could get an 10% to 15% discount when you own a vehicle that’s less than 3 years old.
Good driver discount. Your car insurance might offer a 10% to 40% discount if you are driving for a specific period of time with no accident.
Good student discount. It’s possible to earn an excellent grade. Discounts up to 25% are available from certain insurance companies to students who are full-time in high school and college who are at least B average and who are between the ages of 16-25.

5. Let your insurance company track your Driving

Many insurance companies provide coverage based on your usage. This can cut down on your costs. These programs use an app or device that plugs into your vehicle to monitor your driving behavior. Factors tracked can include the number of miles you travel, speeding and how often you slam on the brakes.

You may qualify to receive a discount if your records prove that you’re a competent driver. For example, if a customer joins USAA’s SafePilot program, they could receive an offer of up to 30%. Snapshot from Progressive as well as State Farm’s Drive Safe & Save are other examples of the usage-based nature of auto insurance.

Be aware that in some cases usage-based insurance could raise your premiums in accordance with 2022’s “Insurance Trends and Forecast” report from TransUnion. The best car insurance for usage-based drivers is for drivers with low mileage who do not drive in the dark and have secure driving habits.

Frequently Asked Questions About the estimation of car Insurance Costs

What information do you require to get an estimate for the cost of car insurance?

You’ll need to provide your age, your city and state, as well as your vehicle’s information (year and make, model, year) and what level of coverage you’ll need. For an estimate of car insurance costs, you don’t need to give out any personal information such as your email address, home address or social security number.

Which are the cheapest auto insurance firms?

While everyone will have a different insurance company, we have information that lists the top companies in your area. This data can help you narrow down the firms that can provide the most competitive rates, when you request an estimate.

Which are the best car insurance companies?

The best car insurance companies give you the coverage you need for a price you are able to manage. Take into consideration customer service and reviews of the company, how they handle claims process and what discounts are available in your research to determine the most suitable one for your needs.

Where can I find a quote after I have an estimate?

MoneyGeek’s reviews will aid you in choosing the right company that offers the coverage you require at a reasonable cost. Use our calculator to estimate how much you’ll have to pay for car insurance and make a list of possible companies. You can then contact your three top car insurance companies to get quotes and to compare them.

Additional Resource:
https://www.allstate.com/auto-insurance
https://www.iii.org/article/what-auto-insurance
https://www.libertymutual.com/vehicle/auto-insurance