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How insurance companies calculate insurance

How Insurance Companies Calculate Insurance:
Factors Affecting Car Insurance Rates

We buy car insurance to make sure that we have the protection we need when driving a vehicle, but few of us actually understand how insurance companies calculate insurance costs. We may understand the features that we get in an insurance policy, but what are the factors affecting car insurance rates?

If you take a little time to think about how insurance companies calculate insurance and the factors affecting car insurance rates then you can potentially cut your insurance costs. In some cases, you won’t be able to change the factors that are used to your advantage, but in others, you may be able to see some savings to your premium costs. So, which factors have a bearing on the price you have to pay?

  • Who is driving the car? The people driving the car (and their driving record) is one of the factors affecting car insurance rates and the cost of the policy. And, the age of the driver(s) will also play a part (younger drivers will have to pay more; older drivers will have to pay less).

  • What are you driving? The car you drive will be put into a group by the insurance sector as part of how insurance companies calculate insurance costs. These groups range from low cost insurance to high cost insurance. The higher the spec of the car, the higher the group number, and the more the premium will be.

  • What’s your driving like? If you get through a year without having an accident or making any kind of claim on your insurance coverage then you’ll get a year’s no claims bonus. The more years you can collect, the less you’ll pay. If you don’t have a no claims bonus, then the cost will be higher.

  • Where do you live? Where you live is another major factor in how insurance companies calculate insurance. If you live in a city, for example, then your insurance costs will be higher than in a small village, in most cases. This is based on the fact that certain areas have higher incidences of claims. So, the costs of insurance in these areas will be higher.

  • What do you want? Another of the factors affecting car insurance rates is the features that you get with a policy. Generally speaking, you’ll pay more for lots of features.  You get what you pay for, after all.         
  • Where do you park? Cars that are kept in garages and that have security systems in place (such as alarms and immobilizers, for example) will cost less in insurance terms than cars with no security.

In some cases, the factors that explain how insurance companies calculate insurance may not be something that you want to change.  You may, for example, love your sports car too much to downgrade! But, some factors affecting car insurance rates can be easily changed to save you money.  It doesn’t take much to have an alarm or an immobilizer fitted. Considering how insurance companies calculate insurance can give you specific cost savings as these factors affecting car insurance rates can be manipulated somewhat on your part so that you get the best deal.

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