Car insurance companies collect information on your vehicle to determine how much you need to pay for insurance. Many times the information is pulled from the VIN number. Other times the information is provided directly by you.

Year: The year of your vehicle does affect your insurance rate. Newer vehicles can sometimes receive a new car discount depending on your car insurance carrier.

Make: What car company manufactures your car can also affect the cost of your car insurance. A lot of times the make signals the value of a vehicle. Is it a foreign luxury car or an American made minivan? Often times a foreign car costs more to insure because the parts can be harder to get and less body shops may work on them.

Model: SE, SEL, GT, are all different versions of the same model. The fancier your vehicle typically the more expensive it is to insure. The base model four door is often the cheapest way to go not only when purchasing the vehicle but also when you go to purchase insurance.

Vehicle Safety Features: Insurance companies absolutely love air bags. They are proven to protect the driver and passengers. PLPD only coverage on an old vehicle with no air bags can be quite a bit more expensive than PLPD on a vehicle with dual airbags. The medical costs of a vehicle corresponds to the overall safety of your vehicle.

Car Alarm: Car alarm companies want to make it seem like the savings on your insurance will cover the cost of the alarm, however it is not likely. Nearly every car insurance company does offer a discount for an alarm, if you select comprehensive coverage on your policy. Comprehensive covers stolen cars, so the alarm discount is only applied to the cost of comprehensive coverage. The savings is often minimal, but it depends on where you live and the value of your vehicle. At the same time, every little bit helps when it comes to the cost of insurance.

Coverage Purchased: It is obvious the more coverage you want the more your car insurance will cost. Determining what coverage you want and what coverage you need is important. If you are struggling with deciding on the right coverage, seek the advice of your agent.

Number of Vehicles You Insure: Insuring more than one vehicle on your policy with liability coverage with evoke the multi-car discount. The discount will apply to each vehicle but it does not increase as you add more vehicle to the policy.

Insurance companies use the a lot of different information on each driver to calculate the cost of insurance. Insurance companies can run reports to obtain your personal information using your driver license number, birth date, address, and social security number.

Age: Whether you are 16, 25, 45, or 65 years old your age has a affect on the cost of car insurance. All insurance companies have their own formula for what age gets a discounted rate but the biggie is always age 25. Twenty-five years old seems to be the magic age insurance companies say you are eligible for a preferred rate.

Driving Record: Insurance companies do not have much to go on when it comes to judging a client's ability to drive. Their only source of information is your driving record. The amount you pay for car insurance will directly correlate with your driving history including both accidents and traffic violations.

Number of Drivers: Adding another driver to your car insurance could affect your price. Certainly when adding a young driver to your policy your rates will likely go up. Having more drivers than vehicles can be a good thing because then the extra drivers can be listed as an occasional drivers instead of a principal driver.

Financial Stability: Take care of your credit score because many insurance companies use it as basis for your insurance rate. The better your score the better your insurance rate.

Primary Health Insurance Coverage: If you have primary health insurance coverage, you may not need to purchase as much medical coverage on your car insurance. Medical coverage limits definitely vary by state so check with your insurance agent on what is recommended.

Home Ownership: Whether or not you own a home plays a role in how much you pay for insurance. Most insurance carriers offer a home owners discount and a multi policy discount as long as you insure both policies with the same carrier. Insurance companies look at homeowners as being more stable and stability reflects a lower risk.

Where You Live: Location, location, location, yes it even affects your car insurance. If you live in an area with high claims ratio it will affect your rates. High theft or high insurance fraud areas are the worst. Sometimes rural areas can pay more because of high deer accident volume. Insurance companies each have their own systems for determining rates, just be aware moving could change your car insurance rate.

Education / Good Student: Some insurance carriers are offering a discount for your level of education. The higher your education level the bigger the discount. Good students are also rewarded with lower rates. Getting good grades and completing college course work requires a certain level of responsibility. Anything that demonstrates responsibility to an insurance company is typically assigned a discount.

Prior Limits of Liability: Insurance companies prefer limits of liability to be 100/300, 100,000 per person and 300,000 per accident. Lower rates are given to drivers at the time of purchasing a new policy if you carried the preferred limits. Most agents do not discuss this affect on insurance premium and just rate according to the limits you have listed on your current policy.

Insurance Company Factors

The cost of insurance is directly affected by how the insurance company operates its business. Is the company privately held or public? How many employees does it have? How much are the employees paid? And the biggest factor, how much money has been paid out in claims?

Profitability: Each insurance company is dealing with its own set of profitability issues. It is the unknown factor that makes each insurance company's rates different. Many factors affect profitability like weather, investments, and underwriting.

Payment Plans: Insurance companies offer different payment plans. Choosing different payment plans can affect your overall cost. Always check for savings by changing your payment plan whether it is with your existing policy or if you are shopping for a new insurance carrier.

Length of Time Insured: As an extra incentive to keep your business, most insurance companies offer lower rates to clients who have been with them for a long time. This discount is often minimal but still helps in the long run.

State Laws: Insurance companies have to abide by the state laws in which you live. It means you cannot go lower than your state's minimum limits. Plus, if your state has an additional fees like Michigan's MCCA fee, both you and the insurance company must comply.