How Insurance Companies Calculate Car Insurance Quotes

How Insurance Companies Calculate Car Insurance Quotes

A car insurance quote is just an estimation of what your rate can be with a particular insurance carrier that you may want to use. To calculate the car insurance quote suitable for you, insurers usually ask a number of questions. These questions allow insurance companies to determine how likely you are to file a claim on your policy and the risk involved.

It only Takes 5 Minutes

It only takes less 5 minutes for an insurance company to calculate your car insurance quote. There is no exact formula as far as calculating insurance quotes is concerned and that’s where estimation becomes important. Calculating car insurance quotes is almost like going through an interview where the interviewers only have your college documents to rely on to determine whether you are employee material or not. It is also important for you to know the factors they use to calculate car insurance quotes so that shop smarter for your car insurance

Factors Insurance Companies Use to Determine Car Insurance Quotes

Insurance companies look at these factors differently and that is why a certain factor may not get you the same price in all insurance companies. Generally, the most common factors insurers use to calculate quotes include:

Your Driving History

If there is any skeleton in you driving history closet, you may end up with higher insurance quotes than you hoped for. For instance, if you have had several accidents in the past, your potential insurer may assume that you will have more accidents in the future. They may also try to find out if your license has ever been revoked or suspended and whether you have been cited for any moving violations. A higher perceived risk will lead to you paying higher rates.


Studies show that drivers under the age of 25 and those older than 65 are more prone to accidents than other demographics and as a result usually pay higher rates. Despite this, the people above the age of retirement can get lower quotes because of their driving experience or history.

Credit-Based Insurance Score

Here, your history of credit-based insurance score is used to determine your insurance quotes. The idea is that a higher credit-based insurance score the les risk you will be and vise versa. A higher credit score results in low insurance quotes while a low credit score results in higher insurance quotes. Your credit-based insurance score is calculated by looking at factors such as debt, payment history, type of credit you have and so on.

Where You Work

Occupations are usually divided into two types; low risk occupations and higher risk occupations. For example, doctors, lawyers and lawyers are in high risk occupations because they are more exposed to long work hours, lack of sleep and high stress levels. This means that they are more likely to get into a car accident than teachers, accountants, artists and scientists.

Where You Live

You may wonder what geographic location has to do with insurance quotes but it turns out that city dwellers pay more for insurance. The reason for this is that the urban setting there is a greater risk of an accident happening than in a rural setting. Urban areas are also have a higher crime rate compared to rural areas and for that reason your car can easily get vandalized or stolen in urban places compared to rural areas.

To get lower insurance rates you can compare different insurance company quotes based on the factors that favor you. Remember that insurers have different formulas for determining prices and may not even include the same factors in the price calculations. Try and find a company that not only offers competitive insurance quotes but also one that is trustworthy.

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