Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

It might seem as if it takes auto insurance companies just seconds to calculate your rates. While technology does make several of the steps in the process quicker, a lot of work is done behind the scenes to set rates and to program algorithms into quoting tools.

The purpose of all of the work on the back end is to make it possible to give consumers quotes quickly without having to do manual calculations.

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You may wonder why you and your family pay such different rates to insure similar vehicles. What many shoppers don’t know is that a long list of factors will change your rating in the quoting system.

Some of these factors have a more dramatic impact than others. Here’s what you should know about your car and how the type of car you drive affects your rates:

How does purchase price affect your premiums?

Whenever you try to negotiate with a sales agent or a private seller, your goal is to get your purchase price as low as possible. Not only does a lower purchase price mean you’re getting a better deal, you’ll also pay less in taxes, title fees, and registration fees.

Unfortunately, keeping the sales price low doesn’t have an impact on your rates.

One of the major myths that you need to debunk is that the price of the car that you’re buying is used to determine your rates for standard auto insurance.

This is true with classic car insurance but not at all when you’re buying a personal auto policy for a car that you use regularly to commute or run errands in. Even though price doesn’t directly affect your premiums, it’s still important to budget properly when buying a car.

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Price and Value Can Affect How Your Claim is Handled

Sales price and value are two different things but they can be interrelated. If you buy an expensive vehicle, it’s more likely to retain a higher value. In the eyes of an insurance company, a car’s value is it’s replacement cost minus depreciation.

Since luxury brands don’t depreciate as quickly, the car will have a higher value for insurance purposes.

A car’s Actual Cash Value isn’t going to impact rates because it changes so often, but it will impact how your claim is handled.

Cars with higher values can take on more damage before they are totaled since the definition of a total loss is when the cost to repair the car exceeds its value at the time of the loss. This is important to keep in mind.

Insurance Companies Do Consider the Cost to Repair a Car

Haggling down the sales price of your car isn’t going to save you when it comes to insurance but shopping for a car that has low-cost parts will.

If you have a loss and you choose to carry full coverage, it’s the insurance company’s duty to pay to repair or even replace your car. When a company is on the line to pay out more for a car, it will charge more.

Some cars are known to cost a lot to repair simply because the manufacturer uses expensive parts or difficult labor techniques that mechanics must be professionally trained to do.

When parts and labor costs are high for the car, the car’s premiums for comprehensive and collision will be higher than they are for the average car. This is why you should compare the true cost to own specific models before deciding which car is right.

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Looking At How Much Damage Car Cause in Accidents

Another factor that’s used to determine the premiums on an individual car is how much damage the car causes to property when it’s involved in a collision.

Larger vehicle and vehicles with heavier body styles tend to lead to higher Physical Damage claims when the driver is at-fault in an accident.

When actual loss data shows that the average Physical Damage claim payout it high, the premiums for Physical Damage Liability on that car will be high. Insurance carriers use symbols called Vehicle Series Rating ISO symbols to assign a rating for the vehicle.

These symbols can change each renewal if new data is collected, which is common for newer models.

You may be a safe driver, but statistically, some vehicles are more likely to get into an accident than others. This generally happens when you’re driving a sports car that people speed in or when you’re driving a car that younger drivers tend to buy.

Be sure to understand models that are involved in more collisions are rated higher than others.

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How the Rate of Injuries in an Accident Affects Your Premiums

Another piece of claims data that’s used when determining rates is how likely it is for someone to be injured in an accident when you’re driving your car.

Both third-party injuries and first-parties injuries are considered. The insurer will look at actual claims data and predict future claims trends. Premiums that are affected by this include:

How do insurance companies assign safety ratings to vehicle?

In addition to using ISO symbols through reputable analytics companies, insurers will use safety ratings that have been assigned by the Insurance Institute for Highway Safety.

The IIHS conducts research on every vehicle model to see how it performs when it’s involved in a collision.

The insurance company might not ask you for the purchase price of your car, but several different pieces of data that are attached to your car’s VIN will impact your rates.

If you want to find competitive rates, use our online insurance quoting system. After you plug in your vehicle data, you can see which carrier has the best rates instantly.