How to Calculate Car Insurance Premiums?

  • Added:
    Aug 16, 2014
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How to Calculate Car Insurance Premiums? Photo by Akash Naidu

Car insurance premium is calculated based on lot of factors. There are various risk factors to be remembered while calculating car insurance premium.
There’s a famous saying, “Hope for best. However, a person must be prepared for worst.” The same theory forms a basis in deciding your car insurance’s premium rate.
The insurance company anticipates as to how many people or customers who have purchased car insurance will make insurance claims. This also depends upon their various circumstances.
There are actuaries who do this job. Actuaries are professional statisticians. They predict future events which are based on several events as well as probability of occurrences. They experiment with all types of permutations & combinations. And then finally the professional statisticians determine the car insurance premium.
There are various factors taken into account like cost which will be incurred while settling claim, firm’s operating cost, how much funds are to be parked towards contingent reserves & taxes payable.
The factors which affect your car insurance premiums are-
Place of residence
Place of residence plays a major role in determining your car insurance premium. If you reside in a big city then there are probability of accidents & theft. This can demand greater premiums. Also, if a person resides in hilly areas which are prone to earthquakes or landslides then there is risk of natural calamity. This again demands greater rate of premium. However, if a person resides in low risk areas then premium charged will be less.

The occupation-
If the person’s occupation requires him to drive a lot & if he uses his own car then his car is going to be most of the time on the road. Therefore, the risks of accidents are high.
Simply, if you’re driving a lot then premium will be higher.

Your car type and car model-
Your car’s model and your car’s make determine certain risk factors linked with it.
For instance, the SUVs will any day execute better during collisions providing greater safety. Hence, injury if occurred to the occupants plus the vehicle may prove to be less severe.
Whereas, the high end vehicles and car models tend to incur greater repairing costs. Therefore, they would cost a person to pay more to insure the car.

Driving history-
This is an important factor which goes in determining your insurance premium.
For instance, if a person has clean record where he/she has no accident histories then he/she can get discounts. The discounts can go up to 50% through No Claim Bonus.
Age also is another factor which determines the premium rate.
If there’s a young boy of 18 years then he/she tends to indulge towards high risk driving. Therefore, certain age brackets or groups may have to pay greater premium than others.

A person can choose vehicle insurance online. Once a person has finished calculating his premium by providing the required details & decided his insurance provider, he can easily buy insurance online in an hassle free manner.

Author's Profile

Akash Naidu is a software Developer and he is an part time content writer writing for different areas including Insurance and Loan sectors. For more information visit: Car Insurance & Motor Insurance

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