How is Car Insurance Calculated?

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Whether you’re new to the road or not, at some point you may have wondered how car insurance is calculated. How do they decide how much to quote you? There are a number of factors that can influence insurers’ decisions. Find out what they are here.


Average car insurance rates are difficult to predict. Why? Well, quotes vary across different insurers, so it’s best to get prices from a number of different companies in order to get the best possible deal.

Generally, insurance companies will charge an amount based on how likely it is for the driver in question to make a claim and how expensive that claim is expected to be. However, there are other main factors that are considered, including:

Your Age

This is a huge factor. If you’re a younger driver, you’ll naturally have less experience behind the wheel and statistically, you’re more likely to be involved in an accident.

According to data from the Department for Transport, 151,474 reported road accidents took place in Great Britain in 2011 and 22% of these involved at least one driver aged 17 to 24. So it’s no surprise that drivers within this age bracket face the highest premiums. It is thought that when a driver gets to 25 years of age, insurance prices instantly drop.

Your Job

It’s important to be as accurate as possible when detailing your job to insurers. Your quote could be higher or lower depending on whether or not you travel regularly in your role, or if you carry expensive equipment or stock in your vehicle.


The Vehicle You Drive

The type of vehicle you drive heavily influences the prices for your insurance. If, for example, you drive a flashy car, this will be much more expensive to replace than an old banger if your car is stolen or written off in an accident.

Read More: What to do After a Car Accident

However, you shouldn’t assume that because your car isn’t worth a lot, it’ll be cheaper to insure. Car insurance not only protects your vehicle but others involved in road accidents that you might cause.

Power also plays a part in insurance costs. The more powerful your car is, the more chance it has of being involved in a costly accident. Consequently, the larger your engine, the higher your insurance will be. Therefore, if you modify your car to make it more powerful, your insurer should be notified.

Where You Live

Your address will play a part in the pricing of your insurance. If you live in an area where there are greater risks of having an accident, perhaps because of a dangerous stretch of road, you’ll pay more. This also applies with crime levels; you’ll pay more for your insurance if you live somewhere with high levels of vehicle crime.


What You Use Your Car For

If you use your car solely for pleasure, your insurance will be much lower than if you use it to commute back and forth to work. Why? Well, if you’re commuting to and from work, you’ll be driving when the roads are busy.

The more you drive, the more chance you have of being involved in an accident, so your annual mileage is also a factor that insurers consider.

Your Driving Record and No Claims Bonus

If you’ve made a claim in the past five years or have points on your licence, the cost of your insurance will be higher. The majority of insurers accept up to five years of No Claims Bonus (NCB), so if you haven’t made any claims then your quote should be lower.

Your Excess

Insurance tends to cost less if you agree to a higher voluntary excess because technically, you’re accepting a larger amount of the risk. Potential pay-outs from your insurer are therefore reduced.

Your premium will be higher if you opt for no voluntary excess as your chosen insurer will have to pay the full amount in the event of a claim.

The Type of Cover You Have

The level of car insurance cover you go for will affect your insurance price. Third party-only is the most basic level of protection, whereas comprehensive provides extra levels of cover. Be sure to check out the different covers and the prices for each.

So, now you know how car insurance is calculated! Bet you feel like a fountain of knowledge now. It’s definitely worth knowing how insurers set the cost of your car insurance, don’t you think?

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