How Are Car Insurance Rates Calculated?

When buying a car, there’s one expense you don’t want to forget to take into account, and that’s car insurance. No matter which state you live in, chances are you will need car insurance to comply with state laws, as well as provide you with financial protection if you are ever in an accident or your car experiences damage for other reasons.

Car Insurance

But how much can you expect to pay? This figure can vary greatly depending on which state you live in and the several factors that insurance companies take into account when working out your premium.

We take a closer look at how car insurance rates are calculated, so you can have a better understanding of which factors affect your premium.

Minimum Car Insurance Requirements

The amount of coverage required can vary from state to state, so when you start shopping around it’s important that you make yourself aware of the minimum requirements, so you comply with your state laws.

Currently, Texas drivers must have liability insurance, which will go towards paying for the medical treatment and to property damage of others involved in the accident if you were to cause the incident. It does not, however, cover your vehicle repairs or treatment of your injuries.

The minimum liability limit requirements are the following:

• $30,000 per injured person
• $60,000 per accident
• $25,000 per accident for property damage

This minimum requirement is also known as 30/60/25 coverage. While this may seem like a high amount, in many cases it won’t be enough to cover the costs. That’s why it may be a good idea to select higher limits on your insurance. Speak to your advisor to find a limit that best suits your needs.
What Affects Car Insurance Rates?

Various factors impact your car insurance rates, which is why it’s important that you don’t just base your expected premiums on the national, or even state, average.

Factors include:

• Your vehicle’s make, model, and year
• Your driving record
• Your credit history
• Your car insurance history
• Where your car is parked
• Annual number of miles you drive in your car
• Your occupation
• Your gender
• Your marital status

As well as these factors, adding optional coverage to your policy on top of the basic requirements, such as comprehensive and collision, will affect your premium.
How To Lower Car Insurance Rates

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Auto insurance rates across the country have risen over the past few years, including in Texas, in part likely due to the costly hailstorms the state has experienced. So, what can drivers do to lower their insurance rates?

If you have been with the same insurer for many years, one thing you may want to consider is switching insurers, as you could be losing out on a better deal elsewhere. If you would rather remain with your current provider, then you could re-evaluate your coverage limits or adjust your liability limits to reflect your assets better if your situation has changed over the years.

Another option would be to apply for discounts such as driver safety based discounts, defensive driving discount, savings for low mileage and usage, or even good student discount. It’s worth doing your research and finding out about any discounts you may be eligible for as this could save you up to 30% on your insurance policy.