The Math of Car Insurance.

  If you own a car, you have to pay insurance on it.  If you drive the family car because you do not own your own car, someone has to pay for the insurance. 

Have you wondered how the cost of car insurance is calculated?  Have you ever questioned why the cost is not the same across the country?  Have you wondered why girls are not charged a premium when they turn 21 while boys have to pay the premium till they are 25?

Calculating premiums for car insurance is extremely complex because they take into account potential loss based on type of car, zip code, location of where car is parked, how far its driven every day, driving history including DWI's, tickets, accidents, and other things. In addition, each insurance company uses slightly different factors to calculate rates and all rates are approved by the state.

This activity, from Canada, explains about the terms involved in car insurance and has students predict which items can effect the cost of their insurance.  It lists things like type of car, house, job, so students have to think and decide.  At the end, the teacher can go through to discuss all the factors.

This power point presentation covers all sorts of insurance but has an excellent section on using tables to calculate the cost of insurance and goes into detail explaining things like 10/30/25.  Although the information may be a bit out of date, it gives a good feel on figuring that out.  The slides walks students through the process of calculating premiums.

Both of the above are actual lesson plans designed to help the student learn more about calculating car insurance premiums but this paper is more scientifically based. It looks at using the generalized linear models used to calculate auto insurance premiums based on the factors of the insured.  This paper actually shows the mathematics involved which is actually more complex than most high school students can do but its nice to show them.

One last resource is a unit from the state of Nebraska which lists a ton of resources to help with the unit.  It looks at premiums, types of coverage, calculating premiums for mandatory coverage, calculating premiums for optional insurance, and a project.  Admitted, the information is from Nebraska but the process is the same everywhere. 

One of the homework assignments that could be done is to contact an insurance agent to get a current quote to share with the class.

Let me know what you think.  Have a great day.