What is the calculation formula for car insurance premiums?
3 Answers
Here is a detailed introduction to the calculation formulas for car insurance premiums: 1. Vehicle Damage Insurance: Vehicle Damage Insurance Premium = (Base Premium + Vehicle Purchase Price × Rate) × Discount Factor. Vehicle Damage Insurance refers to compensation provided by the insurance company within reasonable limits when the insured or an authorized driver causes damage to the insured vehicle in an accident. The premium for Vehicle Damage Insurance is closely related to the vehicle's purchase price and the number of seats. 2. Third-Party Liability Insurance: Third-Party Liability Insurance Premium = Base Pure Risk Premium / (1 - Additional Expense Rate) × Discount Factor. Third-Party Liability Insurance covers compensation for personal injury or direct property damage to third parties (excluding the driver and passengers of the insured vehicle) in an accident, as stipulated by the insurance company. 3. Comprehensive Theft Insurance: Theft Insurance Premium = Base Premium + Insured Amount × Rate. Comprehensive Theft Insurance provides compensation for losses caused by the theft or robbery of the entire vehicle. After a theft or robbery incident, if the vehicle is not recovered within 60 days of being reported to the police, the policyholder must provide documents such as the vehicle registration certificate, vehicle license, and purchase invoice to prove the vehicle's origin and legality in order to receive the claim payment.
I found that car insurance premiums aren't calculated by a fixed formula. As my insurance broker explained when I bought my car, they vary based on multiple factors. Insurers first use a vehicle coefficient to assess the car's age and value—for example, newer cars have higher premiums. Then they add the driver's age and driving record coefficient, so young drivers or those with accident histories face higher costs. There's also a regional coefficient, with urban areas seeing higher premiums due to greater driving risks. Finally, discount coefficients like no-claims discounts can reduce the total cost. So it's actually a layered multiplicative approach, but each company's algorithm differs. When I compared quotes online, I found variations up to 30%, so shopping around can save money. Additionally, car insurance involves choosing a deductible—opting for a higher one lowers the premium but means paying more out-of-pocket during claims. Striking a balance is safer.
The calculation principle of car insurance premiums lies in the insurer's assessment of risk costs to determine pricing. Based on my research, the basic formula includes the current value of the vehicle multiplied by the vehicle model coefficient, with different brand safety ratings affecting the premium; then multiplied by the driver's risk coefficient, such as higher premiums for those under 25 years old; the driving record coefficient increases significantly if there are accidents; finally, the regional coefficient is multiplied by discount factors, such as a 15% reduction for installing anti-theft devices. This process is automated, and entering my information in the App provides an instant quote, with higher deductible plans saving more on premiums. Regularly clearing driving records and maintaining the vehicle in good condition can reduce cost increases. The key to controlling costs is minimizing claim frequency and selecting the right coverage range.
