How Much Is Car Insurance?

The idea of paying for car insurance can seem like a burden. You already pay for car maintenance and gas, and now you have to pay for insurance on a car in case you get in an accident. While the chances of getting into a car accident seem slim, it happens more often than not. Plus, car insurance doesn't just only protect the insured in the event of a car accident, but also covers damages that may arise from that accident or vehicle theft. 

If you're still concerned about the cost of car insurance, it will be beneficial for you to understand how premiums are calculated.

How Are Car Insurance Premiums Calculated?

Many factors go into the calculation of a car premium, these factors are:

  • Driving history (accidents and tickets) - An individual's driving history is a significant denominator that car insurance companies take into account when providing an auto insurance quote. If you have received numerous tickets and have been found at fault for several accidents, you present a larger risk for the car insurance company.
  • Age of drivers on the policy - Car insurance policies with young drivers will typically see higher premiums as these drivers do not have as much experience on the road.
  • Gender of drivers on the policy - Typically, car insurance companies will charge a higher premium for men over women.
  • Residence location - If you reside in a major metropolitan area, such as Los Angeles, you may pay a higher auto premium due to the increased potential of an auto accident occurring. 

While insurance companies do protect you in the event of an accident, they are still running a business. By providing coverage in the event of an accident or theft, an insurance company essentially bets on an individual to not get into an accident which is reflected in a policy premium. The lower your premium price, the less risky you are for an insurance carrier to cover you. 

Another way for insurance companies to mitigate their costs in the event that one of their insured's is in accident is through deductibles. Deductibles are payments that an individual must make in a show of good faith to an insurance company, as they will more than likely pay a larger portion out to repair your vehicle. Typically the larger the premium the lower the deductible. 

Buying auto insurance is a necessary evil, but understanding the costs associated with an auto policy can be the difference between overpaying for coverage or not paying enough in coverage.