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What determines the price of my policy?

The average American driver spends about $850 a year for auto insurance. Many different factors determine the price you will pay for a policy. Understanding what these factors are can help you keep your premiums lower.

  1. The car you drive.
    Insurance companies have a rating system for every car make and model. If a car has a high theft rate or is prone to problems, you will pay more for insurance. Before purchasing a car research the insurance ratings so you can determine the effect it will have on your premium.
  2. Where you live.
    If you live in an area that has a high incidence of accidents, vandalism or theft, your rate will be higher. Insurance companies also consider the cost of medical care and car repair. You will probably pay more if you live in a city versus a rural area.
  3. How often you drive.
    The more you drive, the more chance of accidents. Someone with a long commute will pay more than someone with a short commute. If you drive only on the weekends, you will pay less than someone who commutes to work every day.
  4. Your driving record.
    The better your record, the lower your premium. If you have had accidents or serious traffic violations, you will pay more than if you have a clean driving record. You should also consider who drives your car, their driving record will affect your rate.
  5. Your credit score.
    Studies have shown a direct correlation between your credit score and the likelihood you will file a claim. Insurance companies use your credit history to help determine an "insurance risk score" which is one factor that helps determine your policy rate. Maintaining a good credit score will keep your policy rate lower.
  6. Your age.
    Insurers generally charge more if teenagers or young people below age 25 drive your car. Mature drivers have a history of driving more responsibly.
  7. Amount of Coverage.
    The more coverage you have, the more you pay.
  8. Discounts you qualify for.
    Discounts may be given for: good student, safe driver, multi-car, and anti-theft devices.
  9. Paying in full
    Payments are usually offered in six month, quarterly or monthly installments. Companies usually charge a fee for breaking down the payments. Paying upfront will avoid installment fees.
  10. For more information on auto insurance premiums please visit our Average Monthly Auto Insurance Rates Per State page.

    Last Modified: Sunday 28th February 2010

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