How Car Insurance is Calculated: Factors That Affect Your Premiums

If you’ve ever spoken to your friends and family about their car insurance costs, you’ll realise that the costs vary. In some cases, the costs may vary widely. The truth is that insurance providers will take certain factors into account when calculating your premium. For example, your car insurance provider may look at your driving profile, the vehicle, your driving habits and more. In addition, the type of coverage you select will impact the cost of your premiums.

Fortunately, there are ways for you to lower your car insurance. Here’s what you need to know about how car insurance costs are calculated and how to lower yours.

Several key factors affect car insurance premiums. These include:

Driver profile
Vehicle factors
Coverage Type
Driving habits

Let’s dig a little deeper into each factor.

Driver Profile

Your driver profile, specifically, your age, driving experience and driving history play a large role in calculating your car insurance.

For example, if you’re a new driver or a young driver, you’ll likely pay more for your premium than someone older and more experienced with driving.

Young or new drivers pay more because they are more prone to accidents and risky driving.

According to a study analyzing road traffic accidents reported to the Royal Barbados Police Force in 1992, drivers under the age of 20—who represented only 4% of all licensed drivers—were involved in 18% of fatal accidents where driver error was identified as the main cause.

Fortunately, your premium should gradually decrease once you become older and gain valuable driving experience.

However, you may not see a decrease at all if you’ve ever been involved in a crash. This brings us to our next point, driving history.

Your history of accidents and violations, such as speeding tickets can impact how your insurance premium is calculated.

The more accidents and violations you have the higher your premiums. In contrast, if you have a good driving record, you’re likely to see your premiums decrease yearly.

Vehicle Factors

The make, model and year of the car you drive will impact how your car insurance is calculated.

For example, it costs more to insure a brand-new car than a used one. New cars are valued more highly than older cars and will therefore cost more to insure. At the same time, since new cars rapidly depreciate, your insurance premium could gradually decrease.

In addition, a luxury vehicle also costs more to insure than a more budget-friendly option. One reason for the difference in figures is repair cost. Luxury vehicles cost more to repair. This is also true for a new car, whether or not it’s a luxury brand.

For some insurance providers, the size of your car may have an impact on your premium. Larger vehicles may withstand crashes better and may attract a lower premium.

In addition, if your vehicle has a high safety rating, your insurance provider will likely quote you a lower premium than for a vehicle with a higher risk of injury. If you don’t already know, you can find your car’s safety rating online.

Speaking of safety, if your vehicle has safety features such as automatic emergency braking, lane centering assistance and blindspot warning, your premium may be lower. You’re likely to get a lower premium because your vehicle is less risky to insure.

Having a car model frequently stolen could raise your premium. For example, Hyundai and Kia vehicles had a higher rate of theft due to the inability of the owners to install immobilizers. Insurance providers may have responded to these occurrences by giving owners of these cars a higher premium.

On the other hand, if you have antitheft systems in place, such as a tracker, car alarm or even an immobilizer, you could save money on your premium.

Coverage Type

The coverage you choose will impact how your car insurance is calculated.

For example, if you get the minimum required third-party insurance, you’ll have a much more affordable premium. The major con of selecting this type of coverage is that the coverage is very limited and you’ll have to pay out of pocket for a variety of incidents such as bodily injury to yourself or damages to your car. Third-party insurance only covers injury or damage you may have caused to another person and their vehicle or property.

On the other hand, comprehensive insurance, which has the greatest amount of coverage will be the most expensive option but may end up saving you from costly repairs in the long run. Comprehensive insurance provides coverage for you and your vehicle and a third-party driver and their vehicle. Comprehensive insurance can even cover damage caused by natural disasters.

Driving Habits

Your driving habits are taken into account when your car insurance is calculated. The more miles you cover, the higher your risk of an accident and the higher your premium. However, if you don’t drive your vehicle frequently, you may be quoted a lower rate.

The purpose of your vehicle can also have an impact on how your car insurance is calculated. For example, if you use your vehicle for business, you may have to pay a higher premium in comparison to someone who just uses their vehicle for personal use.

A vehicle for commercial or business use tends to have higher liability limits and needs more coverage in the event of an accident.

Ways to Lower Your Car Insurance Premium

Fortunately, there are several ways you can lower your car insurance premium and save money. Consider taking advantage of the following:

Safe driving discounts- Insurance providers usually offer a lower premium for safe drivers who avoid accidents. For example, here at General Accident, you may be entitled to a “No Claims Discount”. Our “No Claims Discount”, accumulates over time based on the number of years you drive claims-free.
Bundling policies- If you bundle your policies, you may qualify for a lower premium. For example, at General Accident, if you have your car and home insured with us you get a bundle discount of 10%.
Comparing insurance providers- If you want a lower car insurance premium, don’t be afraid to compare insurance providers. You may find another provider who will give you a lower premium and help you save some money. Make sure you’re paying attention to what is covered, excess and other important factors before opting for a seemingly lower premium.
Insuring multiple vehicles with the same provider – Some insurance providers, like General Accident will give you a discount if you insure more than one vehicle with them. Currently, we offer a 10% discount.

How to Get an Accurate Insurance Quote

An accurate insurance quote is important, especially when you’re trying to compare insurance providers to get the best deal.

If you’re looking to get an accurate insurance quote, we make it easy for you. You can get a quick quote from our website by entering some basic information.

As you can see car insurance is calculated using a variety of factors that range from the type of vehicle you have to where you live and your driving habits.

That’s the primary reason why insurance premiums can vary so widely among drivers. If you’re looking to decrease the cost of your premium, there are many paths you can take. We recommend reaching out to us at General Accident to ensure you’re getting an accurate quote and fair premium based on your situation.