Post : How are Car Insurance Rates Calculated?
Title : How are Car Insurance Rates Calculated?
How are Car Insurance Rates Calculated?
How are Car Insurance Rates Calculated?
Determining your car insurance rates is very complicated and something that few people understand. The only people who really understand how it is done are the actuaries who actually do it. One look at the exams required to become an actuary will make it clear that you have little chance of actually understanding how the premiums are calculated. That being said knowing the factors that go into the calculation can help to make sure that you get the lowest possible rates. You may not know how car insurance rates are calculated exactly but you can still understand the basics.
Most people naturally assume that your driving record is the biggest factor in determining your car insurance rates, this is not in fact true. The biggest factor is actually where you live, the cost in one state can actually be several times higher than in another state. In general the more cars there are on the road in the state in which you live the more you are going to pay. Common sense would tell you that the fewer cars there are on the road the less likely an accident. That means that people in sparsely populated states will normally pay less for car insurance however the state's legal system will also be a factor. Some states have complicated legal systems in which cases get dragged out and result in high legal fees. Other states tend to award high judgements to plaintiffs, if you live in one of these states you will pay more for insurance.
The other big factors in calculating your car insurance rates are age and gender. As a rule the younger you are the more you are going to pay for insurance, especially if you are under twenty five. Males will normally pay more than females and again this is especially true for young males. Single people will also pay more than married people. A lot of people think this is unfair but the insurance companies have all kinds of statistical data to prove that young, single males are by far the most likely to cause an accident.
Surprisingly to most people is that your driving record is normally considered to be a secondary factor in calculating your car insurance rates. It seems more important than age, gender or where you live because it is usually the biggest difference between people who live in the same region. After all two young males in the same state would have the same primary factors so their driving record would be the biggest factor in the difference in the rates they pay. Other important secondary factors include the type of car you drive and the one that most people never think about which is their credit rating. The insurance companies assume that people with good credit are more responsible and have fewer accidents, they also have lots of statistical data to back this up.
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