How Car Insurance Companies Calculate Premiums

You might not know this, but insurers offer coverage to drivers based on risk modeling techniques. And over the years, auto insurance companies have streamlined their risk modeling techniques. Now more than ever, the main task is to determine the risk classification of an applicant to arrive at the correct level of premium to charge.

It is easy to assume that the main determinant factor with calculating auto insurance premiumsis the value of the car. But there is more to it than meets the eye. Below are some of the things insurance companies factor in while calculating premiums.

Type of Insurance Cover

The desired type of auto insurance cover plays a significant role in determining the premiums you’ll have to pay. In a nutshell, comprehensive cover tends to attract the highest premiums since it insures you against a wide range of risks. Third party and theft policy cover, on the other hand, are slightly cheaper. However, they won’t protect you against accidental damage.

Third party insurance only protects you from liabilities arising from third parties affected by an accident involving your vehicle. Auto insurance carriers also consider how the vehicle is used in calculating monthly premiums. Generally, private cars attract lower premiums compared to public service cars.

Age

Driver’s age is another crucial factor used in calculating your monthly premiums. Younger drivers are viewed to be riskier clients as compared to their counterparts. This could be due to their low-risk threshold as well as experience on the road. As a result, their monthly premium is likely to be high. Be sure to consider this during your auto insurance quotes comparison expedition.

Gender

Some insurers offer products that greatly target the female gender. It’s very obvious that women are way more careful on the roads hence they present diminished risks to insurance providers. Moreover, most insurance products offer enhancements that possibly fit into their lifestyles.

For example, there are those insurance companies that offer enhancement that covers a lady driver from the loss of her handbag and this demonstrates that your sex can of course determine the insurance quotes you get.