Calculating Car Insurance Premiums



Calculating car insurance premiums is a highly mathematical process. Insurance companies employ literally hundreds of mathematicians who spend their years compiling statistics of how likely different customers are to have an accident! If their statistics show that you are likely to have a car accident, then your car insurance premium will be high. If, on the other hand, the statistics show that you are unlikely to have an accident, then your car insurance premium will be low. It really is as simply as that.

The most common factors that will influence the calculation of your car insurance premium are:

  • your gender
  • your age
  • your car
  • plus previous claims history

It may seem unfair to young men, but the fact of the matter is that as a group, they are far more likely to be involved in an accident than older women. Younger drivers in general are more likely to be involved in accidents than older drivers. Therefore, depending on your exact details, your insurance premium will be adjusted according to your risk.

The other main factor that is used to calculate your car insurance premium will be the car itself. If the car is cheap, then it will generally cost less to insure than a very new and valuable car. The exception to this is that if a car is deemed so old as to be at a higher risk of accident, then this will increase the calculation of the premium. As well as the value of the car, the size of the engine or top speed of the car will be relevant to car insurance premium calculations - faster cars are more likely to be involved in accidents. So fast car plus young male driver = “boy racer” syndrome – very high insurance premiums!

One thing that car insurance companies are starting to experiment with is charging you according to how much you drive your car. Obviously, if you are on the road for many hours a day, this increases the chances of your being involved in an accident. What car insurance companies are now considering to account for this, is the possibility of fitting their customers cars with GPS systems that will tell them exactly much driving was done. They can then charge you so many pence for every mile you drive. The idea is very attractive for people who do not drive their cars too much, and also for insurance companies who no doubt will be able to drastically increase their intake by taking advantage of the new technology. However, there are concerns from civil liberties groups about the rights of car insurance customers to privacy.

Car insurance premiums are significant expenses for drivers. You should also remember that the cost of car insurance could vary by surprisingly wide amounts from insurer to insurer. Therefore, you should always shop around when looking for your car insurance. This is because different insurers may view different factors as important to the calculation of the premium and will therefore come up with different results. For example, if one company views old cars as being at higher risk, and you drive an old car, maybe you would be better off with a car insurance quote from a company that takes other factors into account, such as the size of the engine.

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