How is your auto insurance premium determined?

There are hundreds of factors that go into the calculation of your premium. Some are obvious, like your past driving record, age, claim history, and coverage choices. Some are less obvious, like your insurance score, your choice of payment plans, marital status, ratio of vehicles to drivers in the household. Here are some of the factors that affect the price of your insurance:

  • Where you live – City rates are usually higher than rural and suburban rates. Each territory has its own rate factor, which can vary widely by company.
  • Use of the vehicle – Pleasure use and short commutes get the lowest rates, while business use and longer commutes are more expensive.
  • Age – Teenagers still pay the highest rates. Most companies have different rate factors for every age group, with the lowest rates for people in their 40s and 50s. Rates tend to rise again after age 65 or 70.
  • Marital status – Married people usually have lower rates.
  • Vehicle – Your choice of vehicle makes a big difference, but it’s not just the cost of the vehicle that gets taken into consideration. Crashworthiness is a factor, as are safety devices like air bags and antilock brakes. Also, the past claim history of each individual model is considered.
  • Vehicle age – Generally, the older the vehicle, the lower the price. This is sometimes offset by lack of safety features in older vehicles.
  • Safety features – Anti-lock brakes, air bags, anti-theft devices, and daytime running lights can all save you money on your auto insurance.
  • Annual mileage – Companies often factor in your annual mileage in calculating your premium.  Because annual mileage is difficult to keep updated, several companies are exploring other alternatives to factor in overall vehicle usage.
  • Number of drivers vs. number of vehicles – Some companies factor in the ratio of drivers to vehicles – the more drivers, the higher the premium.
  • Coverages – Your choice of limits, whether to carry collision coverage and deductible options all affect your premium.

Ways to save on your car insurance

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The information in this post is general in nature, and geared toward insurance conditions in Western New York.  As always, you should speak with an insurance adviser to determine your specific insurance needs.

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