How Your Premium is Calculated

Auto insurance is a part of life, one that protects us in the event of an accident or even a tragedy. But the price we pay for insurance remains a mystery to nearly all consumers. Insurance companies won't divulge the equation they use for determining auto insurance premiums, but we do know some of the factors that go into determining each person's auto insurance premiums. If you're trying to find great auto insurance rates, be sure you understand how these factors will impact your proposed premiums:

Contributors to auto insurance premiums

• History: If you have a decent driving history, you will benefit. Conversely, if you have a history of speeding or accidents, your premium will reflect that. Remember that drivers who are considered to be high insurance risks also will pay higher premiums.
• DOB: Your age could be one of the largest impacts on your insurance premiums. Drivers who turn 25 can explain this quite simply - their premiums drop significantly if they have good driving histories. Drivers between ages 50 and 65 have, statistically, the safest driving records. As a result, that age group enjoys the lowest premiums. By no surprise, teens have among the highest premiums.
• Y chromosome: Men have higher auto insurance premiums on average. Statistically, women are safer drivers than men, and as a result they pay less for insurance.
• Ball and chain: Married people are considered more reliable and responsible, and have lower insurance premiums on average. Single people - who tend to be out driving later at night - pay higher premiums.
• ZIP code: Your location will affect your premium. Insurance companies look through extensive data that measure where accidents are likely to happen. If you live in a high-activity ZIP code, you are likely to pay more.
• Your ride: If you bought a hot rod, guess what, you'll pay more to insure it. But if you got a nice, stable minivan, your premiums would likely go down. You can ask your insurance agent for a quote before you purchase a car - it's wise to get comparison quotes on different models so you can save ahead of time.
• FICO score: It might not seem fair, but your credit score will affect your insurance premium. Consumers who pay their bills and manage credit effectively are more likely to be dependable drivers who don't get into accidents. If your credit score is high - over 700 - you may find savings on your premiums.
• Paycheck: What you do for a living will play a role in determining your insurance rates. If you are an accountant, you're not likely to be on the road throughout the day. If you're a wedding photographer, you'll be on the road constantly. Insurance companies keep this in mind as your premium is calculated.
• Commute: Your morning and evening commute are also factors. If you work 30 miles away, it will cost you more than if your commute was only 5 miles. This is why your agent will ask you the purpose for your driving - if you're using the car for pleasure driving or to get to work.