Factors on How is Car Insurance Calculated? | comparethemarket.com

A simples guide

Factors on how is car insurance calculated?

Do you, like most people, grumble at how much you pay for your car insurance? It's an expense that seems to rise every year. It's not a hopeless battle and your car insurance may be one of those monthly bills that can be cheaper with a little help…

Did you know?

50% of customers could save up to £274.51 on their car insurance?* So take a look at what factors impact on your car insurance premium so that you're informed when renewal time comes round again.

Factors on how is car insurance calculated?
*Based on Online independent research by Consumer Intelligence during May 2018. 50% of consumers could achieve this saving with Compare the Market Motor Insurance.     

So, do the insurers pick a price out of the air?

No, it's actually a pretty complex business. Insurers calculate car insurance quotes based on how much of a risk there is that they’ll have to pay out on a claim. They use facts and statistics to work this out.

The main factors in calculating insurance

The type of car you have

The value of the car is of course important, as the more expensive it is, the more it'll cost your insurers 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, modifications can also affect insurance costs and you need to let your provider know about them.

Your age

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. Thankfully it does settle down once you reach 26. There are ways of softening the blow, though. It might be worth considering a telematics policy.

Where you live

The insurers look at the crime rate, how busy the area is, and work out how likely it is that you will make a claim. More about this here.

Your occupation

What you do for a living tells the insurers 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 are also likely to pay more. This is due to a number of factors, including being seen to drive more. 

Your driving history

This has a varying degree of impact depending on what you've got to declare. As you’d expect, three points on your licence for a minor speeding offence will not have as much of an effect on your premium as a previous ban for drink driving.

Anyone else who's on your policy

Everyone who is named on your policy will contribute to the premium calculation - so if you have a 19 year old teenager to add to your policy, or a partner with a previous driving conviction, you may want to think again whether you really want to add them to your policy, or at least make sure you’re sitting down when the quote comes through. More about this here.

4 reasons to buy something small and economical

  • It'll reduce your insurance premiums
  • You may not have to pay any tax
  • A tank of petrol will be cheaper
  • You'll leave a smaller carbon footprint

Take control

As we said earlier, it's not all doom and gloom. You can take back some control and reduce your car insurance quote by just doing a few simple things. The first port of call is to start an insurance quote with us.

Once you have a list of prices, try changing a few options, perhaps by removing some add-ons, such as courtesy car or legal expenses cover or increasing your voluntary excess (there may be a compulsory excess so just make sure you can afford it should you need to make a claim). That should reduce your payments straight away.

What's more, you’re might be walking past a possible money saving opportunity every day. If you have a garage that stores junk, but not your car, make it your family's weekend project to clear it out. By replacing your junk with a safely parked car you could save more money... and make a few bob at a car boot too.

Common 'add ons' that will have an effect on your insurance.

Take a look at your policy to see if they're included and consider carefully whether you want to include them:

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