Depending on your location and the legal framework, the car insurance price can be set by the insurance companies or by the state government.
The amount of car insurance premium you will pay in the end is based on a set of variables the insurance company will use in its calculations. And this set will be slightly different with every company – this is why the car insurance prices differ from one company to another.
Here is a range of elements that may influence your final auto insurance rates:
Car type
There are two methods of calculating car insurance premiums depending on a particular car model. One is using claims experience for each and every car model, which includes relative costs of repair, injury rate, theft and accident frequency etc. The other is using your car's current market value and the ways of setting such a value vary from one company to another.
Intensity of vehicle use
If the car is used intensely the probability of an accident to happen will be higher. That's why the drivers who use their cars more often are likely to pay larger car insurance premiums compared to those who drive less. The premiums may also rise in case you have inexperienced drivers using the car or if more persons are driving the car.
Residence
In metropolitan areas the likelihood of car accidents or theft are considerably higher because of the intense traffic and high population density. That's why you are likely to pay more for auto insurance if you live in a big city.
Driving record
The driving record, as the name suggests, is a record of a driver's licence period, car insurance experience and the number of car accidents involved. In case you are considered a safe driver with minimum at-fault accidents you are likely to be charged with lower car insurance premiums than usual.
Coverage limits and deductibles chosen
When buying a car insurance you may have the opportunity to choose the coverage limits and set the deductibles.
In the majority of states it is mandatory to buy a pre-set minimum of coverage for Third Party Liability. In case you opt for a lower deductible or a higher coverage limit, the resulting auto insurance premium will be higher. This is because in both cases you impose the car insurance company to take on a greater financial risk in case of an accident. To lower the premiums, you may consider choosing a lower coverage limit or a higher deductible, but in that case you are likely to deal with the repairs and the costs all by yourself.
To save on your car insurance premiums you can choose not to buy optional coverage. Like in the case if you have an old vehicle, it would be more cost-efficient to not purchase comprehensive or collision coverage.
Even with all these elements listed, auto insurance companies tend to process all the data in an individual way. That's why we see such differences in price quotes for the same car insurance services with different companies.
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