How much will my car insurance be? Is there any way to know how much my coverage will cost with other companies?
Wouldn't it be nice if buying car insurance was like buying a pair of shoes? You could try them on in the store to discover how well they fit and you can see the price right on the tag.
You could even go online and price shop the exact same pair of shoes and compare prices from several online retailers before buying. You know they fit, so you just need to find the lowest possible price.
But unlike buying shoes, buying car insurance is a little bit more of a mysterious science that leaves a lot of consumers asking "How much will my car insurance be?".
Car Insurance Has Many Factors that Determine Pricing
Unlike most consumer products, car insurance is not one that is identical between car insurance companies. Each company is permitted to set their own prices, and those prices are based on how much income (premiums) are needed to generate a profit for the company and their shareholders.
Companies employ actuaries, which are basically the number crunchers that assess risk and price. If a car insurance company chooses to insure high risk drivers such as those with DUI's or reckless driving convictions on their driving records, then they are choosing to accept more risk in the business they write. In return, they much charge a higher price for car insurance in order to cover the possibility of having large liability losses as a result of insuring high risk drivers.
Think of insurance as a big swimming pool full of money. The money comes from the premiums that you, the consumer, pay to the company to insure your vehicles. If you have an accident, the company pulls some money out of the pool to pay to repair your car and reimburse any injured parties if you caused bodily injury and are at fault.
If the accidents are more severe, then more money is required to be taken out of the pool to pay those losses. So as a result, all the people who put money into the pool must pay a little more in order to cover these few high claim payouts.
Whatever is left in the pool at the end of the year is the car insurance company's underwriting profit. If there is no money left in the pool, then there is no profit and the company will need to access their cash reserves to pay claims. Shareholders will undoubtedly be up-in-arms at the fact that the company lost money, so the next year, based on the actuarial recommendations, the company will either stop insuring high risk drivers or they will raise premiums in order to make up the shortfall from the year before.
Each car insurance company operates a little differently, and each has their own target market they prefer to insure. Some may prefer to insure only accident-free drivers with spotless driving records, while others may allow a few speeding tickets or other moving violations on your record.
How Much Will My Car Insurance Be?
So how does all this impact how much your car insurance will be? It's simple really. Due to not knowing the type of drivers the companies want to insure, you can't possibly know how much you will pay for car insurance until you actually request a price quote from a company.
A quote simply takes your vehicle information, driver ages, driving history and coverage requests such as liability limits, comprehensive
and collision coverages and spits out the magic number that is how much your car insurance will cost. Sometimes it seems there is no rhyme or reason for the price you get charged, but actually there is a lot of behind-the-scenes calculations going on that determine your premium rates.
- If you are a younger driver or have teen drivers on your car insurance policy, you will pay more either across the entire policy or for the vehicle assigned to the youthful driver. This is because there is undeniable statistical proof that younger drivers cause more accidents. If you have a history of speeding tickets or other offenses, that is a strong indication that you will offend again. And you will pay more for your car insurance because of your past violations. That's why it's very important if you get a speeding ticket or other minor offense to find out if your city or county offers a safe driving course that will allow you to void your ticket. The course may cost over $100, but you will more than save that amount by keeping your insurance rates lower. Companies charge a higher premium for several YEARS after you get a ticket, so that could be up to six renewal terms that you pay a higher premium rate due to that one ticket. The type of car you drive or are adding to your policy makes a huge difference in how much you pay to insure them. If you choose to drive an expensive import, chances are it's more expensive to repair than an older domestic model. So your car insurance company will charge you more to insure it. If you have an existing policy and are simply adding a new vehicle to it and are wondering how much it will cost to insure the new vehicle, your company or agent should be able to give you an exact amount to add the vehicle. They already have underwritten your policy and have you assigned to a rate class, so it's not difficult to get a quote on adding a new vehicle to your policy. Other factors that can impact how much you will pay for car insurance are whether you are male or female, whether or not you own your own home or condo, how well you maintain your credit rating, if you have multiple policies with the same company, how high your deductibles are for physical damage coverage, how high your liability limits are and more.
If car insurance was like shoes, it would be simple to tell you how much your car insurance will cost you. But as car insurance companies take into consideration more and more factors into the cost, it gets harder to predict the price based on any simple equation. Insurance is complicated and goes far beyond just what your car is worth. Bad drivers and insurance fraud drive up the cost for all of us, and the trick to finding the best price on car insurance is to shop, shop, shop!
Online shopping makes buying car insurance a lot easier than it was ten or twenty years ago. So if you're looking for a new policy and need to know what it's going to cost you, start by getting quotes from the companies in your area. Our simple online form will get you started by shopping your coverage with multiple companies. You don't have to pick up the phone, drive to an agents office or even visit another website!
More car insurance information
Readers of How Much Will My Car Insurance Be? also found answers to the following car insurance questions.