We realize that the methodology used to determine a premium for an automobile insurance policy seems tedious and very confusing. As a result, we're providing you with an overview of the major factors used to determine the rate of our automobile policies. Perhaps after skimming the page you'll be boasting of your knowledge of auto insurance at your next dinner party. OK, maybe not.

The basic components of determining a premium for an auto policy are: Vehicle Information, Vehicle Usage, Vehicle Location, Driver Age and Record, Deductible and Premium Credits.

Vehicle Information
• Type of Car:
Size. Larger cars tend to be somewhat comparatively less expensive to insure since they typically suffer less damage in an accident, especially if they collide with a smaller vehicle. Conversely, smaller cars tend to suffer greater damage in an accident and typically are rated on a higher scale.

Performance. Sports cars tend to be more expensive to insure since they are statistically driven more aggressively and as such, tend to be involved in accidents more frequently.

• Value of Car:
Generally speaking, within similar size and performance categories, the more expensive the car, the more it will cost to insure.

• Age of Car:
A newer car of a certain type or model will typically cost more to insure than its older sibling.

Vehicle Usage
How far the car is driven per year or daily can affect the cost to insure it: the more it is driven, the more it will cost to insure it. The rationale behind this is that greater time on the road means greater exposure to accidents and other losses.

Vehicle Location
Where you reside (or where your vehicle is garaged) has a major impact on what your automobile insurance will cost. Generally, more densely populated areas will typically bring about higher premiums than less populated ones. This rating method, called territory rating, is practiced because the amount of claims on policies tends to increase as the number of people and cars increases in a given area or territory.

Driver Age and Record
• Driver Age
Who drives the car is one of the most significant factors in determining what rate will be charged. Young drivers - under 25, and especially teenagers (particularly males), generally pay the highest rates. This may come as no surprise because statistics show that this group typically is 2-4 times more likely to be in an accident when compared to more mature drivers.

• Driver Record:
The driving record of the individuals listed on the policy also plays an important role in the premium charged. Drivers with "moving violations" such as tickets for speeding or running a stop sign will usually pay a higher price for their automobile insurance. The more incidents they have, the greater the increase on their premium. Also, studies show that drivers with violations also have a greater number of claims that those drivers who have none.

Drivers with prior claims, particularly "at-fault" accidents generally will pay higher premiums than drivers who are loss-free. Also, studies show that drivers with past claims are more likely to have future claims.

Insurance companies generally consider only the violations, accidents and claims that have occurred in the past three years.

Deductible Choice
This one is pretty simple: the higher your deductible, the lower your premium.

Studies show that the average driver has a claim every five years or so. Therefore, you may save more over that period of time (including the cost of the claim itself) by choosing a higher deductible as opposed to carrying a lower one.

Credits
Many companies give premium discounts in certain states for things like anti-lock brakes, air bags, anti-theft devices and having more than one car on the policy.