How Is Your Car Insurance Calculated?
For a novice, the idea of multiple car insurance quotes that we get come renewal time is like some kind of noble quest. How can the insurance companies know which driver is more cautious and who is more vulnerable to road accidents? Do they monitor us? How do they know our driving habits? The answer to these questions must have raised heads in the minds of the insurers as well which led them to the idea of creating a formula to calculate the insurance premiums.
Although there is no uniform formula to calculate the premium, as it then varies with each insurance company. But the factors that the insurance companies generally take into account and the information that they assign for the measurement of what they call, “risk factors”, are more or less the same.
The Major Factors
Generally there are three important factors that the insurance companies take into account while calculating the insurance premiums for your quote. They include:
Age
The experience of the driver is considered to be one of the most crucial factors when calculating the car insurance premiums. The statistical analysis of car accidents shows that the drivers with more experience are involved in less accidents when compared to younger drivers.
Where you live
The location and the vicinity where the car will be kept has a significant effect on the insurance premium that you are charged. If you live in a built-up and crowded area, your car bears a greater risk of an accident or your vehicle being vandalised. Moreover, if the area as reflected by your postal code has a higher vehicle crime ratio, your vehicle is higher up on the list of the probability of it being stolen. Thus you will be charged higher premium.
Make and model
This may sound obvious, but it is still a pertinent question. The rarer and more desirable the car you have, then the higher your insurance premium will be. This is due to factors such as availability of parts if your car is damaged, many parts for older sports cars are harder to come by compared to more modern cars. Ensure you check out insurance details of any prospective car before you buy.
The use of your car
The occupation of the driver is a very important factor as it determines how and for what purpose the car is used. If the car is expected to be used extensively, it is exposed to a greater risk of running into another car. Moreover, the driver habits of the driver also determine the premium. If the driver has a history of getting involved in accidents, he will be charged more. If however you only every drive to the local shops at the weekend then you could get a lower insurance premium if you only do a few thousand miles a year.
Type of cover
There are three types of coverage that all car insurance companies offer, third-party, third-party, fire and theft and fully comprehensive. This does differ however when you look at motor trade insurance policies for business use. Many consumers seem to think that third-part, fire and theft policies are considerably cheaper than a fully comprehensive insurance cover. This is not always the case. Often there are only a few pounds in the actual price, although it does depend on the make and model of the car you are insuring.