How is My Car Insurance Premium Calculated? By Kev Taylor At Isnare.com Ezine Articles

Car insurance is a protection for you, third parties and your car. Each car policy is assessed individually by reviewing statistics whilst taking into consideration underwriting criteria which consists of a series of factors, the major ones being area, age, gender and driving. Car insurance premiums are determined by a series of rating factors. When these rating factors are calculated, an underwriter can tailor an insurance policy to suit the needs of the individual.

Insurers view the vehicle owner and the vehicle as a risk. The premium that the insurer will quote to you will be a reflection of the amount of risk you oppose to the insurer.

The insurance companies have Underwriters (the people who assess the risks and develop the policy based on the facts provided). The Underwriters are responsible for ensuring that the level of risk that is retained by the insurance company will be profitable to them. For example, if an Underwriter rates an insurance policy too cheap, the amount that they may pay out in claims may outweigh the amount that they have collected in premiums and therefore a loss would be incurred by the insurance company. Thus, it is important for the Underwriter to evaluate and develop a policy that will be primarily be beneficial to the company, whilst still being competitive to the policy holder.

Underwriters have access to a wealth of statistics. Each statistic provides the underwriter with an important rating factor in calculating premiums.

The main rating factors an underwriter will look at are:

• Area
• Age
• Gender
• Driving history

The areas play an important aspect in the risk assessment for a car insurance premium quote. Typically, insurance premiums are higher for residents within inner cities opposed to those who live in suburban or rural areas.

Crime rates are statistically higher in inner cities and the density of people within the area is greater. The increased density presents a grater risk for the Underwriters as more thefts, vandalisms and accidents occur within these increasingly dense areas. Therefore, the likelihood of an insurer having to payout a claim on an insurance policy is higher in denser areas compared with suburban or rural areas.

Age
Young drivers are viewed as a higher risk as statistically; they have more claims than mature drivers.

The age ranges for insurance policies are usually determined in the following age bands.
• 17-20
• 21-25
• 25 and over.

Insurers are more likely to pay out claims in the 17-20 age band than they would in the 21-25 age band. Lesser in the 25 and over age band. People aged over 70 may experience a rise in premiums as the claims in this age bracket increase possibly due to changes in reaction speed or health issues.

Gender
Women are seen as a lower risk than men statistically due to men driving more than women. As a result, men have a higher exposure on the roads and therefore a greater chance of road traffic accidents. Additionally, women are also statistically considered to be more cautious drivers.

Driving history.
The driving history also plays an important part in rating a risk. The more experienced the driver in terms of the driving years, the lower the premium they would attract compared to novice drivers.

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