August 11, 2010

How Auto Insurance Payments Are Calculated

Knowing how your auto insurance payment is calculated is one of the most important steps to controlling your car insurance policy. Many drivers know a few of the criteria that car insurance companies check when assigning rates–a driver's record, for instance, will greatly influence insurance premiums, and even a single traffic citation can have an enormous impact on a driver's auto insurance quote. This is far from the only factor that car insurance companies consider, though, when a new policy is written. There are thousands of factors that can affect your auto insurance payment, and fortunately for drivers, many of these factors can be controlled.

Car insurance companies look at anything that they can find to determine the chances of an auto insurance claim. A big part of any insurance company's budget goes to actuaries who develop comprehensive tables that are used to determine an auto insurance quote. These tables include drivers' zip codes, ages, genders, different makes and models of vehicles, and much more. A driver may not have control over age or gender, but drivers can certainly control which vehicles they drive, and safer vehicles will result in lower car insurance rates. Other factors can be mitigated by certain actions. If a driver lives in a zip code with a high incidence of crime, keeping the car in a locked garage can lower his auto insurance quote significantly. Most insurance companies also allow drivers to make 6 month or 1 year "full payments," which can drastically decrease the annual cost of auto insurance.

There are some factors that a car insurance company cannot legally use to determine a driver's auto insurance payment. This includes a driver's race and handicap status. Insurance law prohibits discriminatory pricing based on these factors, even though other factors that may seem discriminatory (such as gender) can still be used. Insurance law can impact quotes in other ways, particularly the required minimums of certain states and the different court systems of certain jurisdictions. Every driver should take a moment or two to read up on state insurance law, as it's designed to protect consumers and can be extremely valuable when making a car insurance claim or shopping around for new auto insurance.

While a driver can't hope to control every one of the factors that car insurance companies use when determining payments, taking control of even a few of these can make a serious difference in monthly auto insurance payments. Think about your risk factors when you look for an auto insurance quote, and don't sign a policy until you understand why you were quoted a high or low auto insurance quote.