Factors that Impact on Your Car Insurance Premium

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A Brief History

Nowadays, besides the make and model of the car, you want to insure there are many other factors that insurance companies consider to arrive at the premium that you must pay for the desired coverage. It is only normal for people to look for cheaper car insurance, but then it can affect the coverage because everything comes for a price. Looking it from another angle, you get what you pay for but knowing the factors that influence premium should help to have some idea about the kind of budget you must have for your car insurance. Even if you and your spouse take up similar auto insurance policies, the premium can differ because of the factors that come into play when working out the premium.

Digging Deeper

The type of car you drive

The most important factor that influences the auto insurance premium is the type of car you drive. From the size of the car to its features, everything matters when calculating the premium because auto insurance companies assess the risk by considering the safety features of the vehicle. Auto insurance companies use a template for safety rating of vehicles by analyzing huge data about claims, and the respective car makes and models together with analysis of industry safety reports and offer a discount to customers who drive safer vehicles.  Cars that are more susceptible to damage attract a higher premium as well as those that are more prone to theft.  The safer is the vehicle lower will be the insurance premium. Doing some research before rushing to the dealer can save some money on insurance.

Driving habits

As cars can be risky so also can be drivers, which is why insurance companies take into account the driving habits to assess the risks.  Your driving record reveals how safely you drive on roads because anyone who is involved in multiple accidents and has several bookings must pay a higher premium than someone with a better record on the road. Moreover, first-time insurers would likely have to pay more.

The extent of car use or how much you drive on an average point to the extent of risk exposure you have because the more you move around in the vehicle, higher is the risk of accidents and damages. If you commute a long distance to work, the premium you pay will be more than someone who drives less. For insurance companies, more miles mean more risk and more premiums.

The deductibles you pay

Every insurance policy comes with some deductibles, which is inversely related to premium meaning more are the deductible lower is the premium. If you are ready to pay more from your pocket, the insurance company does not mind charging a low premium.

Demographic factors

Your age, sex, the place you live, and where you park the vehicle has a link to the premium you pay for your vehicle. Less experienced and younger drivers often pay higher insurance. Insurance in urban places that are more prone to accidents and damages are more than in rural areas.

Besides the statutory liability coverage, all other coverage that you include in the comprehensive policy will increase the premium.

Question for students (and subscribers): What do you think is a reasonable price for car insurance?  Please let us know in the comments section below this article.

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Historical Evidence

For more information, please see…

Hungelmann, Jack.  Insurance for Dummies.  For Dummies, 2009.

The featured image in this article, a photograph by Nick-D of uninsured cars seized by the Merseyside Police on display outside the force’s headquarters in May 2006, is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license.


About Author

Abdul Alhazred

“But I don’t want to go among mad people," Alice remarked. "Oh, you can’t help that," said the Cat: "we’re all mad here. I’m mad. You’re mad." "How do you know I’m mad?" said Alice. "You must be," said the Cat, "or you wouldn’t have come here.” ― Lewis Carroll, Alice in Wonderland