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What's in a Number? How your Auto Insurance Rates are Determined

If you’ve ever used an insurance comparison website to get a range of car insurance quotes, the differences in rates can be somewhat baffling. When inputting the same basic data about yourself and your car, you could end up with a wide range of monthly premium rates, terms, and conditions. This is because each insurance provider uses a unique formula to determine your level of risk as a driver. Understanding how this is determined can help you take control of your insurance rates and find a more affordable plan that fits your unique profile.

Road Risk

Your driving history and the type of car you drive both have major influences on your insurance rates. If you have been involved in a recent accident, this could cause rates to skyrocket. Insurance companies will also look at how much driving experience you have, as well as whether or not you have any reported accidents or traffic violations. The type of car you drive is also important. This is something to keep in mind if you’re shopping around for a new car. As you read a Mazda Miata or Ford Territory review at motoring.com.au, pay close attention to the safety ratings and features. Dependable cars with high safety ratings will cost far less to insure than flashy sports cars. Older cars are cheaper to insure in most cases because they cost less to replace.

In addition to the type of car you drive and your driving record, insurance companies will also look at your current usage. If you drive to and from work in a long daily commute, you’ll pay a higher premium as a result because statistically there is a higher risk of an accident. Parking your car in a locked garage and only driving when necessary can lower rates significantly.

Personal Finances

Insurance companies are also interested in whether or not you will be able to pay your bills on time. Drivers are issued a credit score specifically pertaining to insurance, which is based on your financial history and current standing. They may take multiple pieces of data into account to calculate this score, including your payment history, length of credit history, and whether or not you have any outstanding debts. This part of the calculation tends to be pretty similar between different insurers, but some will weight credit history more heavily than others. If you have less than perfect credit, it’s more important than ever to compare numerous quotes to find the best deal.

Lifestyle Factors

Although it doesn’t seem fair, insurance companies are all about statistics and will use lifestyle factors you can’t control to help determine your rate. For instance, married couples are deemed less risky than single drivers with no children. They will also take your occupation and level of education into account, as well as your age. As with the other pieces of the puzzle, some will weigh lifestyle factors more heavily than others.

The exact formulas used to calculate insurance rates tend to be closely guarded by providers. The best way to find an affordable deal that fits your specific profile is to collect as many quotes as possible. No matter which formula is used, however, there are ways to help get a better deal.  To begin with, you can compare car reviews Australia with American and European reviews to get a complete picture of a car’s reliability in different locations. And naturally, maintaining a clean driving record and building a good credit score never hurts.

One comment

  1. In the U.S., several companies now offer high-tech ways to set your insurance rates using a plug-in monitoring device. It can record your speed, how often you drive after midnight, and how hard you hit the brakes and accelerate. Several companies even offer free trials so you don’t have to switch your insurance unless you know for certain it will save money – not a bad option if you don’t mind sharing your info.

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