April 15, 2010

How An Online Auto Insurance Quote Is Calculated

The formula used to calculate an auto insurance premium is quite complex and will depend on how much information you provide. Some online companies will only ask very basic info such as age and car model, while some will look into credit history and driving records. There is a general code that is used for calculating auto insurance rates.

The state you live in is the most important factor in determining the cost of auto insurance since the laws and regulations on insurance are implemented at state level. Aside from state of residence, other primary factors involve personal and demographic components such as age, gender, and marital status. On the other hand, secondary factors involve credit history, driving record, place of residence, plus the make and model of your car.

It is the objective of the insurance company to determine the amount of risk you may pose to them if they insure you. Based on the studies they’ve done, it can be determined that those who are 16-24 years old are involved in a disproportionate number of accidents. Those who are 25-49 years old have fewer accidents, while those who are 50-64 years old have the fewest accidents. But those who are 65 tend to be involved in more accidents and by that time they reach 75 years of age, they become more prone to accidents than teenagers. In terms of gender, females have fewer accidents while young males under 35 are known to have more accidents. Married men however, who are 18-24 years old get into fewer accidents than single men.

Among the secondary factors, driving record is the most crucial one. Insurance companies believe that if you’ve ever been in an accident, there is a great chance that you’ll be in another one. And if you’ve had a second accident, the greater the likelihood is that you’ll have another accident. The more accidents you have, the higher the car insurance quotes you’ll get. Credit history is also used to determine auto insurance rates. Those with poor credit will cost more to insure. Your location plays an important role as well. It indicates how much traffic you can encounter every day, and how high the incidence of car theft is in your area. Lastly, the make and model of your vehicle will determine how often similar vehicles get into accidents and how much it would cost to repair them. With all of these factors combined, the insurance company will assign you a rating factor in which they will multiply the base rate for the different types of coverage. All insurance companies will use these basic criteria to calculate quotes but some of them will weigh the varying contributing factors differently.