How does the auto insurance premium work?

Car insurance is compulsory in France, you cannot drive without being covered at least by the Civil Liability guarantee. You can also opt for a better level of guarantees: your car insurance premium, that is to say the amount that your contract costs you for the year, will then increase. Reassure me comes back to the other criteria involved in the calculation of the auto insurance premium. In what cases can it increase? What is the average premium? Here is our guide.

What is an auto insurance premium?

The car insurance premium corresponds to the sum that the insured will have to pay to his insurer in exchange for the guarantees defined by his  car insurance contract . In other words, the premium is the price to pay to be covered for the risks determined at the signature, generally for a period of one year.

The car insurance premium is therefore annual: the risks are reassessed regularly according to several criteriawhich then determine its amount. For example, one of the criteria taken into account in the tariff of your premium is the number of guarantees to which you wish to subscribe: the more your guarantees, the higher your premium will be. The guarantees in car insurance can be damage guarantees (theft, glass breakage, collision, etc.), legal protection, loan of a steering wheel, etc.

The insurance premium is made up of 4 parts, which are the risk, the costs, the profit and the taxes:

It therefore represents the cost of the loss to be insured if it occurs. The risk determines the amount of the pure premium according to the profile of the insured (a father and a young driver will not have the same pure premium, for example).

The costs  correspond to the management costs which enable the insurance company to cover its expenses (rent, employee salaries, etc.).

The benefit  is the remuneration that the insurer agrees on your contract. This profit corresponds to a gross margin that the insurer defines according to its pricing strategy and its customer prospecting.

Taxes : these are set by the government, such as the “terrorism” tax which makes it possible to finance the Guarantee Fund for victims of acts of terrorism and other offences, for example.

The insurance premium is often confused with the contribution . Although both of these terms refer to the cost of insurance, there is a slight nuance. The premium represents the amount you pay monthly (or quarterly) to your insurance company on the basis set by your contract. The insurance premium includes all the contributions: it is therefore more global and represents the annual cost of your contract.

Understand the calculation of the auto insurance premium

First of all, you should know that the car insurance premium , like most other insurance premiums, is free: the insurance companies alone define the amount they charge according to several criteria. Each insurer will define a reference premium, corresponding to the base rate that it sets and taking into account the increases provided for by law.

Insurance companies all perform essential arbitration, depending on their strategy , their policyholders, their costs and the market, more generally. Statistics on the number and cost of accidents can also guide them in their orientation.

In calculating the auto insurance premium, the insurer will take into account:

The desired level of guarantees: the higher the level of guarantees, the higher the premium. You can opt for basic third-party, intermediary, or all-risk coverage. These 3 auto insurance contracts are flexible thanks to the addition of options, which will of course increase the annual premium!

The profile of the driver (s) designated by the contract: age, date of driving licence, etc. Under no circumstances should be a determining factor in the price of car insurance, just like the origins and religion.

The characteristics of the vehicle  : type of vehicle, brand , fuel, age, etc.

The use made of the vehicle : in an urban area? Rural? Private use? Professional ? Where will the vehicle be parked? What mileage traveled or expected?

The deductible : this is what remains your responsibility in the event of a claim, that is to say the amount that the insurer will not reimburse. The lower the deductible you opt for, the higher your insurance premium will be.

The driver’s bonus-malus coefficient and his other antecedents (claims). A  driver’s car insurance bonus and penalty  are calculated according to a coefficient: initially equivalent to 1, it is increased by 25% for any accident (penalty), and reduced by 5% per year without an accident (bonus) .