How Are Car Insurance Costs Calculated?

 What affects the cost of your car insurance?

Simply put, the price you pay depends on the type of insurance coverage you need (e.g., fully comprehensive insurance compared to a third party) and how often and how much car insurance companies expect you to claim your insurance.

To determine the likelihood of a claim, insurers look at information about you and your car, and this information can greatly affect the amount you pay for car insurance. Below are the key factors that car insurers use to determine your insurance premium:

About your car:

The value of a car - The more expensive your car, the more expensive it is to replace (and usually the more expensive it is to repair). So the higher the price of the car, the more you can expect to pay for your insurance.

Car power - The faster and more efficient the car, the more likely you are to have an accident. This increases the likelihood that you will make both the size of the claim and the claim, so more efficient cars tend to have higher costs.

Car Desirability - The more desirable your car is, the more likely it is to be stolen. Replacing a stolen car is a huge cost to the insurer, so this risk is reflected in a higher premium. For example, some classic cars may cost higher than usual.

About you:

Your age - Younger drivers have a statistically higher risk of having a car accident, so they pay the most for insurance (17-25 year olds usually have the highest insurance premiums)

Your Work - Some occupations are considered statistically to include high-risk individuals (e.g., students, journalists, actors, etc.), so they are used as a factor in deciding the cost of your insurance.

Where you live - The rule of thumb is that built-up urban areas are likely to have more traffic on the road (increase the likelihood of an accident) and more car thefts, so living in such areas will increase the amount you pay for insurance.

Car use and storage:

Your Indemnity History - Insurers believe that if you have made a claim before, you are more likely to get a claim again. Most insurance companies offer liability, which can significantly reduce the cost of insurance.

Previous Penalty Points - Insurers see this as a sure sign that you are a high-risk driver, and reflect this when charging you more for insurance than those with a clean driver’s license.

Car Storage - Keeping your car in a garage and not on the street can reduce the chance of theft and thus reduce the amount you pay for insurance. This can be especially important if you live in urban areas where insurance charges more due to the perceived increased risk of car theft.

Mileage - The more you drive, the more likely you are to have an accident, so higher mileage usually costs more.

Cover type:

Third-party vs. third-party fire and theft vs. fully comprehensive - the level of insurance coverage you need is one of the clearest factors that determine how much your insurance costs.

Voluntary Surplus - If you are willing to accept some of the initial cost of your future claims in advance, this will reduce both the number of claims you are likely to make and the cost of those claims to the insurer. Therefore, insurance companies will offer you cheaper premiums.

Unfortunately, some of these things you can’t change (like your age), but other things like storing your car, your caution, and the type of car you buy can all have a significant positive impact on lowering your car costs. your insurance.