Many people find it confusing to try to figure out how their car insurance company determines their premium rate. When calculating a driver's insurance premium, companies will factor in a number of variables. These variables are taken into account to establish the overall risk a driver poses to the insurer. The higher the risk, the higher the premium will be.

Variables that auto insurance companies take into consideration when determining a car premium rate include:

Credit History: Auto insurance companies make use of a person's financial history when determining their premium. They look at their credit history, any financial information found in public records, and if any other companies have checked their credit history. This helps the company determine the driver's risk potential. The assessment is based solely on financial data, not personal information.

Driving Record: Insurance companies will check one's driving record check for a history of accidents, traffic violations, speeding tickets, etc. Those with a bad driving record are considered high risk. Premiums will usually be higher for people with a poor driving record. Violations such as driving under the influence (DUI) will definitely increase a premium. Sometimes an insurance company will reject or cancel an insurance policy

Age: Drivers under the age of 25 are considered a higher risk. People who are between the ages of 16 and 18 tend to pay higher premiums because they have less driving experience. People over the age of 65 are also considered high risk.

Gender: Research data shows that young males tend to have more accidents. Their premiums have a tendency to be higher than females.

Type of Car: This can include the age, model, and the value of the vehicle. A sports car will usually have a higher insurance premium. They will also check the number of claims that have been filed with a particular model to see if that model is prone to problems.

Location: Where you live is a variable that insurance companies consider when setting an insurance premium. Urban areas are more traffic congested so the risk of an accident and theft are much higher. Premiums in a populated area will be higher. The place where you park your vehicle is also considered. People who park their vehicles on a street will likely pay higher premiums than people who park in a garage that locks.

Marital Status: Statistics show that car insurance claims among married policyholders is lower than single policyholders.

Additional factors: Other factors taken into consideration include: the number of miles on the car, how much it will be used for traveling, (miles) and if one ever failed to pay their insurance. There are often discounts for drivers who have ant theft devices, have taken a driver training program, have more than one vehicle with an insurer, and if they have homeowners insurance with the provider.

Auto insurance companies use vehicle statistics to determine what factors are considered high risk. When purchasing auto insurance, it is important obtain several quotes so that you know that you are getting the best price. You can be proactive and take necessary steps to reduce the chances of a high premium. Ways of lowering your premiums include decrease the car usage by carpooling or taking a bus, adopt safe driving skills, buy an older car, taking a driver education course, pay your bills on-time, and keep your credit card balance low. A driver's personal situation can differ from others so it is important to be aware of the variables that can affect the cost of auto insurance.