Determining Car Insurance Prices

An important part of the vehicle purchasing process is determining the car insurance price that you can afford. Liability insurance is mandatory in every state, and if you are leasing or financing the vehicle you may be required to hold collision and comprehensive insurance as well. Insurance costs are an unavoidable part of vehicle ownership, so include them in your financial decision.

Don't spend all of your money on the vehicle of your dreams, only find you can't afford the insurance payments.

Develop or Consult Your Current Budget
If you are financially prudent, you probably already have a monthly or annual budget. If not, now is a good time to make one. List all your current monthly income on the top half of a spreadsheet or piece of paper. Include a realistic estimate of your wages, as well as interest or dividends from any investments you own. On the bottom half, list current expenses. Include rent or mortgage, food and clothing, retirement savings, entertainment and payments on credit cards or student loans.

Analyze Budget Constraints
Add rows for monthly vehicle payments, fuel and insurance to the budget described above. Research local title and registration fees, then divide by 12 to distribute the fees across the year. Calculate how much money you can spend to "zero-out" your budget. Don't spend this much, however. Leave a buffer for surprises and emergencies.

Gather Insurance Quotes
The easiest way to get insurance pricing is to shop online. You will need the make and model, and possibly VIN, of the vehicle you wish to insure. Check the websites of several national. Include any applicable discounts for senior citizens, good students or safe drivers. Consult with a local agent or broker if you don't have the necessary information to fill out the web forms. With 2 or 3 quotes in hand, you should have a fair idea of how much you will be asked to pay in premiums.

Factors Affecting Car Insurance Price

It helps to know what kinds of things go into the car insurance price an auto insurance company might quote for an individual or a family policy. Some primary factors determine what you will pay for car insurance over a certain period of time.

Driver Risk
This is a major influence on the rates you get from an insurer. Insurance companies have sophisticated systems for figuring out how a higher risk rating affects the cost of a car insurance policy. Often, drivers with just one mark on their driving record have a hard time getting affordable insurance from conventional companies. They may have to go to state assigned risk pools or non-standard auto insurance companies to get the coverage they need to be legally on the road. Some states have a "tiered car insurance system" that can make it tough to keep car insurance costs low after a traffic citation or DUI/DWI offense.

Zip Code
Another factor in car insurance price is the zip code where the vehicle will be primarily kept. For those who live in high crime areas, high traffic zones or other high risk places, auto insurance costs range a lot higher than those of policy holders in serene rural areas. Always consider how your neighborhood can affect your ability to get a low car insurance price.

Car Related Factors
Companies also use your choice of vehicle to come up with a final result. One relevant item is the safety and security gear on a vehicle. Cars and trucks with better safety, anti-lock brake systems, airbags and other functional equipment, will be cheaper to insure. High-priced vehicles with a lot of blue book value will be more expensive to get insure.

Discount Offers
Different auto insurance companies may offer discounts based on the policy holder's clean driving record, safety compliance, associations, military or student status or even a college degree. This last discount comes in the form of an "alumnus discount" that a company gives when it has a contract with a certain school. Shop around to get the discounts that apply to you.

How Insurance Varies

Men, teenagers and city dwellers are considered a higher risk than women, adults and country dwellers, respectively. This is based on general statistics accumulated over the years, and have become a standard industry practice.

If you accumulated a number of speeding or parking tickets in the past year, chances are your average insurance rates will be higher. The same goes for those who were involved in a traffic accident, regardless of who was at fault. Those arrested for DUI will likely be penalized with a higher than normal insurance premium upon renewal, and may be categorized as high risk, gaining eligibility for an assigned risk program. An assigned risk policy is reserved for "high risk" individuals. It enables them to secure a new policy, but with a higher premium payment than the usual.

Your age will be a factor. Teenagers are generally regarded as high risk, regardless of state. Senior citizens, age 70 and up, also pay a higher premium than the usual.

Having a poor credit rating or credit score affects insurance rates. Insurance companies regard individuals with a poor credit rating as higher risk, and they may be eligible for an assigned risk program.

Average prices of car insurance depend on where you live, as there are different laws implemented by different states. It would be advisable to check your local legislation regarding this matter.