What Car Insurers Consider When Calculating Your Premium

Your Vehicle

Your car insurance provider will take into account a number of factors relating to your vehicle when calculating your annual premium, including:

The car’s make and model

Its security features (for example, a car alarm or an engine immobiliser)

Its engine size

Its insurance group

Its age

Its mileage

Whether or not it has been modified

Whether or not it is an import car

When it comes to your vehicle’s insurance group, it’s important to realise that every car is assigned to a group from 1 to 50 with cars in lower groups generally cheaper to insure.

A range of factors are used to allocate vehicles to a particular insurance group, including the car’s financial value and performance level, the cost and availability of spare parts for the vehicle, and the average time required for repairs.

You

Both road traffic accident data and insurance claims data have demonstrated to insurers that young drivers represent a much higher insurance risk than older drivers.

In fact, data from Brake, the road safety charity, has revealed that drivers under the age of 20 are 33% more likely to be killed in a car accident than someone in their 40s or 50s.

Research suggests that younger drivers are more likely to take dangerous risks when behind the wheel, while their relative inexperience on the road is also a contributing factor.

The increased insurance risk for younger drivers usually translates into higher car insurance premiums, while older drivers often find that they’re offered much cheaper car insurance premiums – particularly if the older driver has built up a substantial No Claims Discount (NCD) for 20 years or more.

It’s worth pointing out that the relationship between older age and cheaper premiums does break down a little when a driver reaches their mid-70s, because data indicates that drivers aged 75 plus are more likely to be involved in an accident than someone who is 10 years younger.

Drivers in their 70s or 80s are also more likely to be seriously hurt when they are involved in accident, which can also prove more costly for insurers.

Your Occupation

Your occupation can impact your car insurance premiums if you use your car for work. Typically if you are spending a lot of time in your car it will mean higher mileage and an increased risk of being involved in a traffic accident.

However, even if you don’t use your car for business your occupation can still influence the cost of your insurance, because some insurance providers use it as a proxy for your risk appetite.

It probably goes without saying that racing car drivers, stunt drivers, acrobats and fire-eaters have higher risk appetites than nurses, accountants or receptionists, and some insurers may consider that this appetite for risk could translate into speeding violations or other types of risky driving.

Your Location

Car crime is an important consideration for insurance providers, so where you live can have a significant impact on whether you’re offered very cheap or very expensive car insurance.

Beyond crime, if you live in a heavily built-up area you are more likely to be involved in a car accident than if you live in the countryside.

Where you park your vehicle will also be a factor – parking the car in a garage or on a driveway reduces the risk of accidents, vandalism and theft, which can in turn result in cheaper insurance.

Your Driving History

Your driving history has two parts to it – how long you’ve held your full licence and whether or not you have any points or driving convictions on your licence.

If you’re a provisional licence holder your policy will usually be much more expensive, although it might be possible to reduce your costs by opting for temporary learner insurance instead of taking out an annual policy. Given the fact that many learner drivers pass their test in less than a year this is certainly worth considering.

If you’re a full licence holder you will likely find that your insurance is prohibitively expensive when you first get your licence, but gradually becomes more cost effective after you’ve held your licence for a few years…provided you don’t receive any driving convictions or have points added to your licence, of course.

If you are given penalty points for speeding, running a red light or some other driving offence your insurance will almost certainly be more expensive until the points are removed from your licence.

Your Claims History

The main driver on a car insurance policy can earn a No Claims Discount (also known as a No Claims Bonus) for each consecutive year they hold insurance without making an insurance claim.

In practice this means drivers can often build up a very sizable discount on their annual premiums if they are safe drivers and never have to make a claim on their own insurance.

In fact, some older drivers are able to build up a No Claims Discount of 20 or 30 years, which could amount to a 60% or 70% discount on their premiums.

Your Medical History

There are a number of medical conditions that could impair a person’s ability to drive, and if you were diagnosed with one of them you would need to declare that diagnosis to both the DVLA and your insurer.

The full list of conditions that need to be declared is fairly extensive, ranging from diabetes to alcoholism to Alzheimer’s, but some of the conditions are age-related which means your medical history is likely to be a more important factor as you get older.

Your Optional Extras

Most insurance providers offer policyholders a range of optional extras that can be added to their policy, such as breakdown cover, windscreen cover or legal expenses cover.

While these extras can prove convenient, and in some cases may be cheaper than taking out separate cover, they will usually increase your insurance premiums a little.

Some motorists may also decide to take out a car warranty, which can sometimes be taken out with your existing insurance provider as well although it will usually be a standalone policy rather than a car insurance add-on.

See our latest commentary on car insurance news in the UK including updates on latest technology developments in making your life easier when insuring your vehicles.

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