| How is my premium calculated? |  |
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Many consumers are confused about how their automobile insurance premiums are calculated. They mistakenly believe that they have no control over the cost of their auto insurance. While it is true that companies are not permitted to charge different premiums to the customers from the same town with the same driving history (except for certain specified discounts), Massachusetts drivers do have the ability to lower their auto insurance premium.
Each year, the Division of Insurance sets a base rate - or average rate - for Private Passenger Automobile Insurance Policies. Insurers then calculate each driver's actual premium through variations from this base rate. They do this in four basic steps with adjustments based on:
- Your car, driving experience and location
- How much insurance you want
- Certain discounts
- The Safe Driver Insurance Plan (SDIP)
Your Car, Driving Experience and Location
The average rate is adjusted up or down for you depending on the make and model of your car. Newer and more expensive cars result in higher premiums than older and less expensive cars. In addition, drivers are classified based on their years of driving experience: Drivers with 6 or more years of experience are classified as Experienced Operators and pay lower premiums. Inexperienced Operators - those with less than 6 years of driving experience - pay higher premiums. Finally, your premium is adjusted up or down from the base rate based on the town where you garage your car. Residents of towns with higher claims costs pay higher premiums than those from towns with lower claims costs.
How Much Insurance Do You Want
Once the base rate is adjusted based on your car, driving experience and location, your premium can go up or down based on the amount of insurance you choose to purchase. Choosing higher coverage limits or lower deductibles will raise your premium. Lowering your coverage limits or selecting higher deductibles will lower your bill.
Discounts
Once your premium is calculated from the average rate based on your car, driving experience, location and the amount of insurance you want, your insurer then applies certain discounts that can lower your premium. Examples of discounts are low-mileage, passive restraint, anti-theft device, and group discounts. All available discounts are explained in Section IV of this brochure.
Safe Driver Insurance Plan (SDIP)
Finally, your premium may increase or decrease based on your driving history. The Safe Driver Insurance Plan (SDIP) is the point-based system that lowers premiums for drivers with clean driving records, and increases premiums for drivers with traffic violations and at-fault accidents. Drivers receive surcharge points for violations and accidents that occurred within the 6 years immediately preceding the effective date of the policy. SDIP is explained further in the next section.
Return to Auto Insurance Index.
Source: Massachusetts Division of Insurance
Note: This is general information and is not meant to be a substitute for reading your Massachusetts Automobile Insurance Policy. That policy is your insurance contract. Questions or disputes concerning your automobile insurance will be resolved according to the terms of this policy. If you have any further questions please contact our agency. |
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For information about Lynch Insurance please contact:
William Lynch |
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| Mass Registry of Motor Vehicles |
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