How do car insurance companies determine what to charge you?


Quick Answer

Insurance companies use factors such as coverage type, the amount of coverage, driving records, car type, parking location and driving frequency to determine car insurance rates, according to the Insurance Information Institute. Credit score, age and gender also affect car insurance rates.

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Full Answer

Car insurance policies that include comprehensive and collision coverage are more expensive than more basic policies, and policies with high deductibles generally have lower monthly premiums, as the Insurance Information Institute explains. People with fewer accidents and serious traffic violations on their driving records pay less for auto insurance in addition to people with longer driving records. People who insure vehicles with a high likelihood of theft, high potential repair costs or the potential to inflict significant damage on other vehicles generally pay more for insurance.

Car insurance companies charge more to urban drivers due to higher rates of theft, vandalism and accidents, according to the Insurance Information Institute. People who use their cars often or travel long distances also pay more for car insurance. Insurance companies generally charge more to drivers under the age of 25 or for policies that include younger drivers. Male drivers pay higher car insurance rates due to higher risks of DUIs and serious accidents until they establish good driving records. Insurance companies also consider the credit ratings of drivers to ascertain the likelihood of claims filings and the costs of claims.

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