How is my Premium Calculated?

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. This is not true. Massachusetts drivers do have the ability to lower their auto insurance premium by shopping around, driving safely, choosing appropriate coverage, and taking advantage of discounts.

Insurance companies group you with other individuals who share your risk characteristics – such as the number of years of driving experience. Insurance companies then calculate your individual premium, using the base rate for your group, and then revise your premium to reflect your individual risk factors and appropriate discounts. In determining your actual premium, insurance companies consider your years of driving experience, the number and type of your at-fault accidents, the number and type of your traffic violations, the vehicle you drive and the principal place where you garage that vehicle. Insurance companies may also consider other risk factors if those factors are relevant to risk and approved by the Commissioner.

Extra Risk Rating

You may be denied comprehensive coverage or required to pay a higher extra-risk rate if you or another driver listed on your policy:

  • Own a high theft car, unless you have installed a minimum anti-theft device,
  • Have been convicted of auto theft or auto related fraud within the last 5 years,
  • Have two or more auto theft or fire claims within the last 3 years, or
  • Have filed a claim with an intentional and material misrepresentation within the last 5 years.

You may be denied collision coverage or required to pay a higher extra-risk rate if you or another driver listed on your policy:

  • Have been convicted of vehicular homicide in the last 5 years,
  • Have been convicted of auto theft or auto related fraud within the last 5 years, or
  • Have been convicted in any category of driving under the influence of alcohol or drugs within the last 3 years

Driving Safely Can Reduce Your Premium

Companies are free to create Merit Rating Plans or use the existing SDIP. These plans lower your premium based on years of incident-free driving, or raise your premium based on at-fault accidents and traffic violations. Most insurance company Merit Rating Plans and the SDIP provide good driver discounts to drivers with clean driving records. Driving safely and maintaining a clean driving record will almost certainly reduce your automobile insurance premium.

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