How The Car Insurance System Really Works

Have you ever wondered exactly how your car insurance provider really figures out how much money they're going to charge you for your insurance premiums? The car insurance system can seem confusing at times and downright random at others, but believe it or not a system really does exist. All you have to do is find the path that your insurance agent uses to calculate your premiums and you can find the shortcut to reap the cheap insurance coverage at the end.

The first thing your car insurance agent is going to do is look at your personal stats. How old are you? Are you married? Where do you live? Where do you work? How good is your credit score? Older drivers have more experience. Married drivers are considered to be more stable. People who live in cities like New York or Los Angeles, where bumper bowling (or drag racing) down Main Street still counts as Friday night entertainment are more likely to have an accident. Teachers and engineers statistically have fewer accidents each year than other professions, and people with a good credit score are more responsible and therefore a better risk.

At least, that's what your insurance provider thinks. Whether it's true or not-well, no one's ever going to tell them!

The second thing they're going to look at when they're calculating your car insurance premiums is your driving history. This is a huge black hole that puts the final nail in the coffin of cheap car insurance, and it's one that many, many drivers fall into year after year. Speeding tickets, accidents, DUI/DWI and other traffic violations make you a risk, and that's a risk that your staid and conservative insurance provider doesn't want to take. As a result, they're going to boost the cost of your insurance premiums to compensate themselves for the amount of money they're afraid they're going to be paying out in claims each year.

The third thing your car insurance company is going to look at is your car. There's a single, simple principle that you need to know when it comes to insuring a vehicle: The more it's going to cost your insurance company to replace it, the more it's going to cost you to insure it. The more likely it is to be stolen, thereby making your insurance company pay to replace it, the more it's going to cost you to insure it. The more likely it is that it will be involved in an accident because it's the type of car that you can't help but go zero to sixty in down a country road, the more it's going to cost you to insure it.

In fact, the more fun your four wheeled toy is, the more it's going to cost to insure it. It's like the car insurance companies are finally catching on.

Finally, your car insurance company is going to take a look at-your car insurance. There are plenty of things about your car insurance that are going to impact your premiums, including how high your coverage levels are, how many extras you want to add on and how much you're willing to pay in deductibles after an accident. Lowering the first two and raising the third can save you hundreds of dollars on your car insurance each month.