How is my Premium Calculated?

Many factors combine to create your premium. We can help demystify things, and explain what’s behind the most complex number in your policy.

Premiums can vary widely from person to person, policy to policy. To better understand how your premium is calculated, let’s start with the basics.

Your premium is the amount you pay Allstate that covers everything needed to keep your policy active.

Your premium is calculated using different factors and variables, the most important of which is the policy or package you carry (the more options, the more coverage, the higher the premium). The coverage limits you specify also play a role.

Your auto insurance premium reflects things like the make, model, and year of your insured car(s), the number of insured vehicles on your policy, and the number of insured people on your policy (for instance, adding a teen driver might increase your premium).

Your coverage limit is the highest dollar amount Allstate may pay if you make a claim on a covered loss (that’s insurance terminology for any damages that fall within the bounds of your policy).

The higher your coverage limit, the more coverage you’ll receive, but you’ll generally pay higher premiums for that coverage. (Lowering your coverage limits typically lowers your premiums. Talk to your agent to see if you can save money.)

Your deductible is the amount of money you’ve agreed to pay on your own when you make a claim that’s covered by your policy.

For example, let’s say damage repairs total $1,500. If your deductible is set at $500, then you’ll pay the first $500, and we’ll pay the remaining $1,000 to get your car fixed and back on the road. Alternately, if your accident results in, say, $500 worth of damage (or less), you’ll cover all repair costs, as the amount falls within your set deductible.

A lower deductible means you’ll pay less out-of-pocket after an accident; however, this increased coverage will result in a higher premium. (Alternately, increasing your deductible can help bring your premiums down, but will also increase your out-of-pocket expenses.)

Your DMV (Department of Motor Vehicles) record is a lot like a résumé for the road. It documents your driving record. So your “road résumé” can have a definite effect on your premium.

When evaluating your road résumé, in most states, we’ll look at the last 36 months on record. (If we’re investigating past accidents, we may look at the past 60 months on record.) A clean driving record means you’ll likely pay a lower premium, as well as qualify for money-saving discounts as a result of your safe driving.

Alternately, if you have a number of moving violations, accidents, or previous insurance claims within that time period, you may have to pay a higher premium to cover the additional risk associated with poor driving records.

Outside of your specific policy features, one of the most important factors used to determine your premium is your insurance score, which is based on information contained in your credit report.

Your insurance score is an excellent predictor of the insurance losses you may incur in the future. If you’re a customer who’s less likely to incur insurance losses, these scores also help us reward you with lower premiums.

Some of the factors that help determine your insurance score include: long-established relationships with credit lenders, low debt balances, a low number of recently-opened accounts, and a low number of requests for higher credit limits or additional credit.

Insurance scores also take into consideration things like bankruptcies, judgments, collections, and delinquencies. And we’ll evaluate all of these variables in a very grounded, balanced way, allowing positive factors to outweigh negative ones for a solid overall rating. (These factors may vary from state to state.)

For more information about how we use your credit information, click here: http://www.allstate.com/about/credit.aspx

As you can see, a lot of different things work together to determine your premium. If you still have questions, or if you’d like to make any changes to your policy, talk to your Allstate agent or call 1-800- ALLSTATE® and one of our qualified, knowledgeable insurance representatives will be delighted to help.