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How Car Insurers Calculate Your Premium

Ever wondered how your car insurance premium is calculated?

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Where You Live

Where you live and work plays a big role in the cost of you insurance premium. Urban areas, with greater population densities and heavier traffic, get higher rates than rural areas. Your specific neighbourhood or whether you live in a secure housing complex also plays a role. If your car is kept in a locked garage at night where you live or in a secure basement during the daytime where you work, you would see a reduced premium rate.

Security Features

The premium may be reduced if the vehicle is fitted with security features. Cars fitted with anti-theft systems such as GPS Tracking devices, visible wheel, steering locks or ignition cut-off anti-hijack systems are less likely to be stolen, and hence less expensive to insure against theft.

Business vs. Private Use

If you use your car for business regularly, you would inevitably have a higher annual mileage rate. Higher than average mileage rates increases the chance of being involved in an accident which translates into higher risk to an insurer and your premium would be adjusted accordingly.

Excess Amount

Most insurers allow you to negotiate the amount of the excess you are willing to pay. This means you can undertake to bear a fixed amount of the loss for every claim, and hence get a substantial discount on your premium. Generally, the higher the ‘excess payment’ value that you agree for, the lower your premium will be.
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