What is a car insurance premium calculator and why do I need it?

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Things to Remember...
  • Car insurance companies consider many factors when determining how much to charge someone for insurance coverage
  • Statistically, single people, men, and young drivers have more accidents than their counterparts do. Thus, people in these categories represent higher risk
  • Many people don’t realize that insurance companies also ask the credit bureaus for your credit history as part of the process. As the Federal Trade Commission explains, studies have shown a correlation between people who handle money well and non-risky driving habits
  • The rate quote you get from one company can be hundreds of dollars more or less than another company’s. That’s where an auto insurance calculator comes in handy. These calculators are handy tools that help take some of the guesswork out of auto insurance

Some things are easy and fun to shop for. Car insurance is usually not something most people would put on this list. How do you even know what is a good price for insurance?

Fortunately, there are some great tools on the Internet that can help. Why should you always use an online calculator when shopping for auto insurance? Keep reading to find out!

If you are looking for car insurance, start your process by using our FREE online quote tool above!

How Insurance Companies Compute Premiums

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First, it’s helpful to understand a bit about how insurance companies calculate the premiums they charge you in the first place. Car insurance companies consider many factors when determining how much to charge someone for insurance coverage.

The companies use all this information primarily to decide how much risk that driver presents to the company, or how likely he will cost the insurance company money. The higher the risk you present, the higher your premiums will be.

First, they’ll need some basic information about the drivers. The age, gender, and even the marital status of the drivers are important.

Statistically, single people, men, and young drivers have more accidents than their counterparts do. Thus, people in these categories represent higher risk.

Your driving record will also play a major part in determining how risky you would be as a client. If you have a clean driving record, you would be a lower risk. Multiple tickets and accidents would mean a higher risk, and a higher premium.

Many people don’t realize that insurance companies also ask the credit bureaus for your credit history as part of the process. As the Federal Trade Commission explains, studies have shown a correlation between people who handle money well and non-risky driving habits.

The insurance companies also want to know if you have a history of paying your bills late. This can be an indicator of whether or not you will pay your car insurance bills on time.

Where you live is yet another factor in this risk formula.

If you live in a densely populated area, like a large city, you are at a higher risk for being in an accident simply because you drive there.

Some cities have even higher accident rates than others. Since people in small towns and rural areas face far less traffic, their risk and rates are often lower.

The company will also look at the type of car you drive. Partly they are looking at how expensive the car would be to repair or replace in case of an accident. Some types of cars, whatever their value, are more expensive than others to insure are.

The best example of this is sports cars. Since these are fast cars, they are considered riskier than just about any other type and are charged accordingly.

Also, remember that the amount of coverage you want will affect the price. A liability-only policy will obviously be less expensive than a policy that has comprehensive, collision, uninsured motorist, and PIP.

Just remember that insurance is there to protect your finances.

Skimping on coverage to save money on the premium is not a wise move in the long run.

For more information about determining how much insurance you need, see the Insurance Information Institute’s crash course in auto insurance.

Auto Insurance Calculator

One thing that takes the fun out of auto insurance shopping is that each insurance company will take all this data and use it just a bit differently. They have computer formulas that they have developed, and they are all different.

So the rate quote you get from one company can be hundreds of dollars more or less than another company’s.

That’s where an auto insurance calculator comes in handy. These calculators are handy tools that help take some of the guesswork out of auto insurance.

An online auto insurance calculator takes a standard format that insurance companies use as well as information about rates that have been charged in your area.

It then takes your information that you would typically give an insurance company and computes an estimate of what you can expect to pay.

Remember that this is just that, an estimate. It isn’t a promise of what any one company will offer you. What it offers is a ballpark figure that will give you a benchmark from which to work.

If you want a general idea of the cost of insurance by state, the Rocky Mountain Insurance Information Association has put together a chart showing average auto insurance cost by state.

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Benefits When Shopping for Insurance

This estimate can be of great benefit when you’re shopping for auto insurance. For example, if it’s been a while since you shopped around for insurance, using one of these calculators can give you an idea of whether you’re overpaying for your insurance.

If the calculator says your yearly average should be about $1,200, and you’re paying $1,600, it’s probably time to get some quotes from other companies.

Once you have gotten some quotes from several other companies, the calculator can still be helpful. Since the calculator has given you an idea of what you should be paying, you can disregard any company that wants to overcharge you.

It can also let you know that there may be a problem if you get a quote that is far below the estimate. This company may be trying to pull something over on you or hasn’t quoted you for the amount of coverage you want.

Benefits When Shopping for a Car

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If you’re shopping for a new or new-to-you car, an online auto insurance calculator can be extremely beneficial.

Since adding a car to your policy, or trading in one car for another can greatly affect your insurance costs, it’s helpful to know how much a difference it will make before you buy the vehicle.

For example, as mentioned earlier, sports cars are one of the most expensive types of cars to insure, no matter who is driving them. What many people don’t realize is that insurance companies classify almost all two-door cars as sports cars.

So let’s say you are looking for a car for your 18-year-old son to take to college with him. Both of you go to the car lot and are trying to decide between two different cars.

They are the same make and model, only one is the two-door coupe while the other is a four-door sedan. Before you decide which to buy, you plug in the information into an online auto insurance calculator.

The calculator will tell you that the coupe is much more expensive to insure, especially for a teenage driver. Since this could result in a significant increase in your premium, you can make an informed decision about which car to buy.

Thus, an online auto insurance calculator can help you get a better idea of the true cost of owning a car, which includes not just the monthly car payment, but insurance costs, gas, and maintenance.

Things You Can Do to Save Money on Insurance

If you still feel like your car insurance is too high, there are some steps you can take to lower it. When you enter information into the calculator or for an online quote, ask for a high deductible.

If you have comp and collision on your policy, set the deductible as high as you can afford, preferably $1,000.

By agreeing to pay more for a repair yourself, you can significantly lower the amount you’ll pay for insurance.

You can also enroll in a defensive driving course. You can find these online for a fairly low amount. By completing one of these courses, you can get a discount on your policy.

You can also go over your credit history to make sure it’s accurate. If you have outdated or inaccurate information on it that brings your credit score down, this can hurt you in many ways. This can cause your insurance premium to be much more expensive.

How Your Car Can Save You Money

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If you are car shopping, look for features that can bring down your insurance costs. This goes beyond just staying away from sports cars.

The most important things to look for are safety features. The largest part of an insurance claim resulting from a traffic accident is the medical expenses, not the physical damage to the car.

Car insurance companies love cars with safety features because these can greatly reduce the number of injuries and their severity, which saves the insurance company money.

One of the most important features to look for is anti-lock brakes. Advanced airbag systems, including side curtain airbags, are also highly desired. For more information on safety features to look for on cars check out Consumer Reports.

Anti-theft features can also lower premiums. Look for cars that have engine immobilizers. This device keeps the engine from running unless the key is in the ignition, preventing hotwiring.

For even more discounts, equip the car with an electronic car locator. Some vehicles are equipped with these from the factory, while others can be done aftermarket.

Start your search for low insurance rates for FREE by entering your zip code below!

FREE Auto Insurance Comparison

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