Car insurance companies will calculate a premium based on a number of factors – knowing what affects your car insurance premium could help you to make an informed decision. Everything from your age and occupation to your car’s annual mileage and claims history will be looked at, helping the insurer to determine how high a risk the driver will be, and also the likely costs if a claim is made. As of December 2012, gender is no longer used as a factor when deciding a premium, so women can no longer expect to be offered cheaper car insurance than men. However, knowing what is being assessed will give you an idea of what to expect, and help you choose the right car insurance for you.
Age groups considered a higher risk will pay more for insurance. One of these groups is younger drivers, and those who may have only recently passed their test – government statistics claim a driver aged under 21 is 10 times more likely to have an accident than one over 35. Those aged over 65 are also deemed to be a higher risk and are therefore likely to pay more.
If you are using the car in a busy urban setting where more accidents occur, the calculated insurance will be higher than if you use it in an area with a lower rate of accidents. The same applies if the area has a particularly bad crime rate. These risks are determined by postcode, meaning a person in the next street with a different postcode could pay less.
Regardless of whether a car is used for work, or even a commute, insurers will rank job titles differently. Certain occupations can be seen as safer to insure, so will most likely receive lower car insurance premiums.
Third party only is traditionally the cheapest type of policy, while comprehensive is usually the most expensive, as the price reflects the amount of damage the insurer is expected to cover. Although as third party insurance is a popular choice with younger drivers, nowadays this isn’t always the case. The excess decided upon will affect the overall price, with a driver who agrees to a larger amount – carrying more of the risk themselves – paying less. If a policy is intended to cover additional drivers, perhaps younger and not as experienced, this can also cause the overall amount to rise.
If you have made a claim recently, received points on your driving licence, or shown evidence of a frequent number of accidents or driving offences in quick succession, these factors could add up to a higher premium. Lengthy periods without a claim, and the accumulation of a no claims discount, will most likely see the amount reduced.
A sportier car, or one with a bigger, more powerful engine, is thought to pose a greater risk, and will therefore carry higher insurance than a smaller, less powerful car. How easy replacement parts are to source is also taken into consideration when calculating your insurance, and could increase the price of cover - for example, for a restored classic. If a car has been modified, even if the changes are cosmetic, the owner is generally perceived as a higher risk. Smaller vehicles with low fuel consumption will generally be the most economical to insure.
The more miles a car covers each year, the longer it will spend on the road, and so increasing the likelihood of it being involved in an accident. How and where the car is driven can play a factor too; if a car is used for a daily commute, for example, it will be spending more time in dense traffic, with a greater risk of accident.
Insurance companies will calculate a higher premium if they think they are more likely to pay out. If a car is kept in a secure location, this could mean you pay less. Similarly, if the vehicle has an approved alarm or immobiliser, and therefore another deterrent to thieves, this could help lower the final figure.
Drivers who pay a year's cover up front, rather than in monthly instalments, will save money, as they will not be charged interest by the insurer. A poor credit rating could also increase the cost, as statistically those with a low credit score are more likely to make a claim.