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If you’re buying because insurance for the first time, you may be curious how insurance companies determine your premium – which is the amount you pay in order to have insurance coverage for your vehicle.
The cost of your car insurance premium may vary since it’s based on a number of different factors, including your driving record, how much you drive, the types of insurance coverage you choose and even your age.
Let’s take a look at how a car insurance premium works, the average insurance costs and the factors that can affect your insurance rates.
- How does a car insurance premium work
- How much does it cost for a car to be insured?
- What are the factors that determine your premium insurance?
How does a car insurance premium work
Your premium is the amount you pay to an insurer to insure your vehicle.
Depending on the payment options offered by your car insurance company, your car insurance premium could be paid monthly, every six-months, or even once a year.
Your insurance provider will provide the coverage you have outlined in your policy in exchange for your auto insurance premium.
Your car insurance premium costs will depend partly on the type of coverage you choose. But, there are other factors that can impact your total cost. (More on this later).
In every state except New Hampshire, you’re required to have a minimum amount of coverage. This can help you protect your wallet by covering costs up to the coverage limit specified in your policy. For example, it could cover injuries or property damage that you cause to another driver in an accident.
Keep in mind that the cost of your car insurance premium will be different from the cost of your deductible. The insurance deductible refers to the amount you pay out-of-pocket on a claim that is approved before your insurance kicks into effect..
How much does it cost for a car to be insured?
According to the 2021 Auto Insurance Database Report of the National Association of Insurance Commissioners (NAIC), the average liability insurance premium in the United States was $ 644 in 2018. The average varied from one state to the next, with a low of $ 308 in North Dakota, and a high of over $ 1,015 for Louisiana.
The average national premium for comprehensive, collision, and liability coverage was $ 1,189.
The cost of your car insurance premium depends on many factors. Some of these factors are within your control (for instance, where you live and the type of car you drive), while others are beyond your control (such your age).
What are the factors that determine your premium insurance?
Here are some factors that could impact your car insurance rates.
- How much self insurance coverage you have – Do you want only liability coverage or comprehensive or collision coverage? Or even complete coverage? Higher coverage will probably mean higher premiums. High coverage limits and/or low deductibles will increase your car insurance costs.
- Your driving history – Are there any mistakes on your record or are you an experienced driver? Are you a convicted driver with a few convictions and an accident? Even the amount of time you’ve been driving can affect your insurance premium.
- You live where you live – Urban neighbours often have higher rates for theft, vandalism, accidents and vandalism than rural areas. Your car insurance may be more expensive if your home is in a large urban area.
- Your age – Insurance coverage for younger drivers is more expensive because they have less driving experience and are more likely to be involved in an accident.
- The type of car that you drive – Insurance companies consider several factors about your car when determining your premium. These include the cost of repairs and your safety record. Your insurer may offer a discount if your vehicle has safety equipment.
- Your credit history and insurance score. Insurance companies use your credit score to predict whether you will be in an accident or file a claim. California, Massachusetts, Hawaii and Hawaii have all banned credit based insurance scores from determining insurance premiums.
- Your driving habits and mileage – Do your commutes take you long or are you a weekend driver who only drives to run errands? Your premium could go up if you drive a lot.
What’s next?
There are many factors that affect the cost of your car insurance premium. Make sure you shop around for car coverage. Compare insurance quotes from several auto insurance companies to find the best rates and coverage for you.
Also, ask about possible insurance accounts and other ways to lower the cost of your car policy.
