Demystifying the Calculation Car Insurance Rates

You just purchased new car & now you
e 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 monthly premium quote. But how exactly do they calculate that number?

Continue reading to understand how insurers determine your rate & 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 states department insurance. While its true that auto insurers must follow certain laws when calculating rates the rates themselves are established by law.

After requesting quote the car insurance company considers various factors as they underwrite your rate. However because each company uses their own actuarial method youll see widely varying rates from different insurers.

Number crunching

Depending on your states insurance laws insurers normally calculate your premium rate based on some combination the following factors:

* The year model body type engine size & safety features your vehicle * Your age gender & marital status * Your personal credit history * Your driving record * Expected usage the car such as if you are using the car for commuting to & from work pleasure or as collectible. * Home ownership status & occupation * Number drivers that will be using the car & their ages * Number vehicles you own * Requested coverage limits * Where you reside * Assumed weekly monthly or annual mileage

Generally your agent will add all this information into computerized system. The system automatically places you into price group based on your personal information. The insurance company then subtracts any discounts for which you qualify & you
e left with the final quote.

Where does my premium go?

If you elect to purchase policy with the company youll begin paying monthly premium. But what exactly does your monthly premium cover? Heres typical insurance premium breakdown:

* Almost 70% your premium goes towards losses & loss expenses * About 26 percent your premium goes toward marketing commissions & other administrative costs * About 4 percent your premium contributes to the insurance companys profits

You better shop around

Each insurance company has differing sets claim payments & expenses & they set rates for each price group accordingly. Thats why youll likely receive varying quotes from each insurance company. This is why its so important to take the time to shop around & find the best rate.

Plus while insurers are prohibited by law to calculate rates based on race or religion they can consider your age gender & marital status. However each company places emphasis on different factors. For example while one company may place more emphasis on drivers gender another company may view their driving record are more important.

This is yet another reason to request plenty quotes before you settle on an insurance company. In addition to the rate you should also consider which company offers the type coverage you desire. Do your homework & find the best fit for your unique auto insurance needs.

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