How car insurance is calculated
With car insurance premiums varying so much - both between different providers and different customers - you might well wonder how car insurance is calculated.
When you apply for car insurance, you will be asked a series of questions, including where you live, your age, occupation, make and model of car and any security features it has, as well as your motoring history and if you’d like to add a voluntary excess. These points and more are all taken into account when your premium is calculated.
Age
Your age is a major factor affecting the price of your car insurance. Drivers under 25 tend to pay the highest premiums. Inexperience means insurers see younger drivers as higher risk - and accident statistics back this up. Young drivers can take certain steps to lower the price, such as opting for a Black Box or Telematics policy, and will gradually build up a no claims bonus in their own name, assuming they avoid accidents.
Occupation
What you do for a living can affect how much you’ll pay for car insurance. Some jobs are seen as higher risk, or insurers believe people in certain occupations drive more.
Residence
Where you live can affect your insurance price significantly. Your premium will be calculated according to your postcode, and factors like car crime and accident rates for that postcode will be taken into account. Inner city areas are more often classed as high risk than more rural locations.
Car
The make, model and marque of your vehicle are used in working out car insurance premiums. All cars are placed in one of 50 insurance groups, and the higher the number, the higher the risk. Expensive cars are clearly costlier to replace, and any kind of car with modifications may also cost its owner more to insure.
Security
Security is considered when insurance costs are calculated, and this is done in two ways. Firstly, any security features your car has, such as an alarm, immobiliser or high security door locks, may lower the price. Secondly, keeping it in a garage or monitored car park is also likely to cut the cost of your premium, while keeping it on a public road might cost more.
Use of the car
The way you use your car may be taken into account too. For example, if you use the vehicle for commuting, you will be seen as driving more often during busy times and this may up the price.
No claims bonus
The longer you have had car insurance for without making a claim, the more no claims discount you should be entitled to. Some insurers will even let you pay extra for no claims bonus protection, so you might be able to continue benefiting from this even if you do make certain kinds of allowable claims.
Excess
If you offer to pay a voluntary excess, this may reduce the cost of your car insurance. This is because the insurer would have to pay less in the event of a claim, plus they know that you may not make small claims as they wouldn’t be covered anyway.
Type of cover
Whether you opt for fully comprehensive cover, third party, fire and theft or third party only will affect the price you pay. A lower level of cover is not necessarily cheaper, however, so do get quotes for other types of policy.
Extras
You can add all sorts of extra cover to your policy. Some are included for free, while others cost more. These policy add ons range from motor legal protection to breakdown, personal possession, courtesy car, key and personal accident cover.
