If you are not overly familiar with car insurance you may be wondering what insurance premiums are. And even if you do know, perhaps you are unaware of the way in which they are calculated. Auto insurance can be a tricky area if you have no experience with it, so here is a brief explanation that might help make things a little clearer.
What are premiums?
If you are a beginner in the world of auto insurance and you would like to know what car insurance premiums are, then here goes. An insurance premium is simply the amount of money due to pay for your policy. In relation to auto insurance this can be paid annually in a lump sum, or in smaller installments throughout the year. Paying a lump sum is usually cheaper than paying monthly installments.
How are premiums calculated?
Anyone who pays auto insurance is interested in how premiums are calculated, if only to check that they are getting a fair deal. Well, these premiums are based on a number of factors and can include but may not be limited to:
- Level of coverage required.
- Where vehicle is kept.
- Where you live.
- Annual mileage.
- Existing penalties.
- Existing claims.
- Type of car you drive.
- Driving history.
These things are all taken into consideration when you apply for auto insurance and they will go a long way to determining your premium. It can also be affected by other benefits available with a policy, such as vehicle leasing in the case of an accident and legal liability coverage. Differing conditions may also exist in different countries around the world.
Hopefully this article will clear up a few things in relation to car insurance and when you come to apply next for an auto insurance policy, you should have a good idea of what to expect. To find out what your car insurance premiums might be, you can get a free no-obligation car insurance quote:
Alternatively, have a look at our guide on how to save money on car insurance premiums to learn more about reducing your payment.