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How do insurers calculate car insurance costs?


Do you know how insurance companies calculate car insurance premiums? Read this to help reduce your insurance costs

Do you know how insurers calculate car insurance?

When you apply for car insurance, the insurer will ask a series of questions about you, your driving and the car you drive .

With your information, the insurance company will access the likelihood of you making a claim and the likely cost of such claim. It is this that will determine the cost of your car insurance.

Questions the insurance company will ask in order to calculate car insurance cost

When applying for car insurance the information you give will affect the amount you pay for your insurance.

  • Age and driving experience – If you are a new driver, the insurance provider is unable to know if you’re a reckless or responsible driver
  • Where you live – Your postcode can have a positive or negative effect on your insurance because if you live in an area where crime is higher, you will pay more than in a lower risk area.
  • Points on your licence – If you have points on your driving licence. insurers will class you as a higher risk driver and your premiums will cost more.
  • Previous claims – When you don’t make a claim on your policy, insurers reward you with a no-claims bonus this has a significant effect on reducing the cost of your insurance.
  • type of car you drive – Every car driven in the UK is given a Car Insurance Group Rating numbered one to 50. The more expensive and powerful

    a car is the higher the insurance group rating it will have. A lower valued car with a smaller engine will be in a lower insurance group. Buying a car in a low insurance group is the best way to lower car insurance for young drivers.

  • Value of the car – the higher a car’s value, the more it will cost for replacement parts or to renew the car if stolen or in an accident.
  • Modification – A car with modifications is likely to attract a higher premium.
  • Car security – Fitting a security device such as an alarm, tracker or immobiliser could reduce the cost of your insurance.
  • Where your car is parked overnight – If you park in a garage or on a driveway, your insurance will be less than if your car is left on the road due to risk of theft.
  • What you use your car for – Social and domestic attracts the lowest premium. Driving to work is the next step up, and if you use the car for business travel as well this will cost more to insure.
  • Mileage – Higher mileage will mean a higher premium. The more miles you drive, the more chance you have of being involved in an accident.
  • Voluntary excess – If you choose to pay a higher voluntary excess, this can significantly reduce the amount of your insurance.
  • Additional drivers – If you add an extra named driver to your insurance who is experienced behind the wheel, this could cut the amount of your premium.

How the insurance company will calculate car insurance

Category: Insurance

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