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How car insurance premiums are calculated

How car insurance premiums are calculated

Worried about the cost of car insurance? You’re definitely not alone as it's an expense that seems to rise every year. Luckily, reducing your premium need not be a hopeless battle. Your car insurance may be one of those bills that can become cheaper with a little help… you just need to learn the ins and outs of how it’s calculated.

Daniel Hutson
From the Motor team
minute read
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Posted 13 JULY 2020

How much can I save on my car insurance?

50% of customers could save up to £289 on their car insurance** by comparing quotes from multiple car insurance providers with us

**Based on Online independent research by Consumer Intelligence during May 2020 50% of customers could save up to £289.85 on their car insurance premium.

How is my car insurance premium calculated?

When calculating your car insurance premium, insurance providers will look at various factors including your occupation, your annual mileage, your address, how much voluntary excess you are willing to pay, the make and model of your vehicle, where you park your car overnight, your age, how long you have been driving for, your driving history, any no claims discount as well as whether or not you have added any named drivers onto your policy.

Ultimately, car insurance providers calculate your car insurance premium by assessing how big of a risk you pose to them. They do this with the help of facts and statistics related to all the above mentioned criteria.

How does my job affect my car insurance?

What you do for a living tells the insurance providers more about you and how likely you are to claim. You may think, quite rightly so, that racing car drivers pay more for their car insurance. But you may be surprised to learn that some more common job types, like estate agents, disc jockeys and football players, are also likely to pay more. This is due to a variety of factors, including being seen to drive more.

But even similar job titles can result in different premiums, for example, construction worker and bricklayer, or chef and kitchen staff. So if your job title fits in more than one category, it might be worth checking quotes for all of them. But remember the details you give should be as accurate as possible and not misleading, otherwise you could invalidate your policy.

How does the make and model of my car affect my car insurance?

The more expensive your vehicle is, it will typically cost your insurance provider more if you need to make a claim if your car is ever written off.

Cars are also categorised into insurance groups, and that plays an important role in calculating your premium. Lastly, unnecessary car modifications can also affect insurance costs and you need to let your provider know about them.

How does my age affect my car insurance premiums?

Young people between 17 and 25 have a hard time when it comes to insuring a car – sometimes the insurance is as expensive as the vehicle itself. There are ways of softening the blow, though. It might be worth considering a telematics car insurance policy or adding an experienced named driver to your policy – just be careful of ‘fronting’.

How does my address affect my car insurance?

Insurance providers will look at a range of statistics from your area including general driving behaviour, the crime rate, how busy the area is and the average number of claims (both legitimate and fraudulent) and work out how likely it is that you’ll make a claim.

How can I reduce the cost of my car insurance?

One of the easiest ways to possibly save money on your car insurance is by comparing quotes from multiple insurance providers.

Once you have a list of prices, check to see which policy suits your needs. Some policies may include a number of add-ons that you might decide you don’t need. You could also increase your voluntary excess (there’ll be a compulsory excess too, so just make sure you can afford both should you need to make a claim).

Will 'add-ons' have an effect on my car insurance?

Usually, yes. It’s up to you to decide how important they are to you though. Removing them from your policy could save you money now but cost you a lot more in the long run.

The following types of add-ons could impact the cost of your car insurance:

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