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How Are Prices Determined For Car Insurance?

How much you pay for car insurance is determined by a variety of factors. Combined, these factors determine your risk profile, i.e. how likely the insurance company believes you are to make a claim, and what the amount of that claim might be. Ever ask yourself “how exactly are prices determined for car insurance?” Below we take a closer look at a few of the most common factors they take into account before quoting you a price for auto insurance.

Factors that affect the price of car insurance

Where you live.

Urban drivers typically pay more for car insurance than those living in rural areas or small towns. This is because of the higher rates of theft, vandalism, and accidents in cities and large towns. Whether you park your car in a secure garage or on the street could also play a role, as could whether or not your car is fitted with one or more anti-theft devices.

Your driving history.

The better your driving record, the less you can expect to pay for auto insurance. If you have committed serious traffic violations or had one or more accidents, you will most likely be quoted a higher price. And if you are fresh from high school and trying to get insurance for your first car, you will unfortunately not have a track record – so to stay safe the insurance company will typically quote you a higher price.

The distances you drive.

The more mileage you put on your car during a typical year, the higher the chances are that you will sooner or later be involved in an accident. That means you will pay more when it comes to prices determined for car insurance. If you only use the car occasionally for leisure purposes, you are likely to pay less for car insurance.

Your age.

Generally speaking, experienced drivers will pay less for car insurance than less experienced ones. If you are below age 25, you might have a particularly hard time getting a reasonable quote. This is because, statistically, younger drivers are involved in more accidents.

Your gender.

Whether our male readers like it or not, they tend to get into more accidents than females. They also have more DUIs (drive-under-the-influence accidents) than the ladies. And when they do have an accident, it tends to be more serious than with their female counterparts. So typically they pay more for car insurance.

The type of car you own.

This is about more than just the market value of the vehicle. Some cars are more likely to be stolen than others. Or they might cost more to repair. Certain brands have a reputation for being safe, e.g. Mercedes Benz, while others might have a tendency for the brakes to fail or the odd wheel to come off at high speed around a sharp bend. This can affect prices determined for car insurance

Your excess.

The excess you agree to will have a direct impact on your car insurance premiums. The more you are prepared to pay in case of an accident, the lower your auto insurance premiums are likely to be.

The type of cover you opt for.

When you buy car insurance, you can generally speaking choose from three different levels of cover:

  • Comprehensive.
  • Third-party, fire and theft
  • Third-party only

Some US states require that you have at least third party cover. Others require no-fault insurance to cover your own and your passengers’ medical and related expenses after a car accident, And a few states require that you have both.

Hosto Financial & Insurance Services Navigates Prices Determined for Car Insurance

Still have questions about prices determined for car insurance? Learn more by calling us at (618) 779-5808.

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