Insurance premiums calculations complex and depend on many different risk factors. Different companies have different calculation rules, but the basics are the same. Generally speaking, the most important factors are:
 - State and location
 - age of driver (for young drivers sex is also an important factor)
 - driving record
 - car model and type, how old it is, engine size

All the information is is put together and the computer system calculates a "rating factor" that will be multiplied with the "base rate". For instance, if a insurance package is priced at $100 (that is the "base rate") and your rating "rating factor" is 1.2, your total cost will be $120 ($100 X 1.2).

Insurer's location

Laws are regulated at the state level, so the state where you live is a very important factor. For example Hawaii has very liberal laws and many uninsured drivers. North Dakota on the other hand has conservative laws and nnot so many uninsured drivers, also less cars, so less chance of accidents. Taken this into account people from Hawaii pay around 3 times higher insurance premiums than the North Dakotans. Another thing is the place where you live. If there have been many car thefts in your neighborhood, the risk factor is higher.

Driver's age, sex, marital status

As already known, young drivers are more likely to get into accidents, hence the young driver insurance premiums are much higher. Especially people aged between 16 to 24, have the highest risk factor. People from 25 to 49 have a much lower risk factor, and people from 50 to 64 are declared to be the safest drivers. Then again, starting from 65, the risk factor starts to rise. 75-yera-olds have quite the same risk factor as teenagers! Generally, women have also fewer accidents than men.But gender is important only for people under 25, as young men have lots of more accidents than young women. Married men between 18 and 24 have also fewer accidents, hence they have a lower risk factor – they can get a much cheaper young drivers insurance.

Driving record, credit history

It is another very important factor. The likelihood to get in an accident is much bigger after you have already had one. At least that is what the insurance companies believe.With a third or fourth accident your insurance rates are are hitting the roof. Credit history is another factor, though quite controversial criteria to determine the rates. According to statistics people with bad credit have more accidents.

Car

The model and type of the car is used to check how often similar vehicles get into accidents. Sports cars have much higher rates. Also the engine size will determine the final rates significally.
 

Filed under: Car insurance tips

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