How is car insurance calculated?

What factors affect car insurance?

Many things can affect how much you pay for car insurance, like your job and how many miles you drive each year. Here are some factors that can influence car insurance costs:

Occupation

When calculating your car insurance cost, your job matters. If you drive a lot for work, your insurance might be more expensive. Meanwhile, some jobs have more insurance claims, so their insurance costs more. For example, if bricklayers make a lot of claims, their insurance could be more expensive.

It’s important to provide the right job when you buy your insurance. If you don’t, your insurance might not cover you if you need to make a claim.

Make of car

The kind of car you want to insure affects how much you’ll pay. Cars are sorted into 50 car insurance groups to help insurers set prices.

Cars in lower groups may be cheaper to insure because they have smaller engines, are easier to fix and parts are cheaper. Cars in higher groups could cost more to insure because they have bigger engines, are more likely to be stolen and are more expensive to repair.

Annual mileage

How many miles do you drive each year? If you drive a lot, you might pay more for car insurance because spending more time on the road increases the risk of accidents.

However, this isn’t always the case. For instance, a study from January to August 2023 found that drivers who drove between 12,000 and 13,999 miles per year paid less on average for their monthly premiums than those who drove between 2,000 and 11,999 miles.

Voluntary excess

The voluntary excess you choose can also affect your car insurance price. If you agree to pay more voluntary excess, your insurance quote might be cheaper because you’re taking on more of the cost if you make a claim.

However, don’t choose a higher voluntary excess because you think it will lower your insurance cost. Pick an amount that you can afford. Also, remember to consider your compulsory excess when deciding on your voluntary excess.

Driving history

Your driving history can play a role in determining your car insurance cost. If you don’t make any claims for a year, you earn a No Claims Discount (NCD). Having several years of NCD can show that you’re a safer driver, which might lower your premiums.

However, if you’ve made claims or have driving convictions like speeding points, this can increase your insurance price.

Named Drivers

Adding other drivers to your car insurance can change the cost. A named driver is someone listed on your policy who can drive your car, but the vehicle isn’t primarily in their name. This could be a child, grandchild or friend.

When you add named drivers, it can affect your insurance price, as you may be changing the ‘risk profile’ of the policy. The cost change depends on who you add. For example, if they have past claims, your premium might go up.

Does the type of cover I buy affect my car insurance?

When buying car insurance, you can choose from three levels of coverage. The type you select can affect how insurers calculate your premium. The three levels of coverage are:

• Comprehensive coverage
• Third-Party Fire and Theft coverage
• Third-Party coverage

Different levels of insurance offer various protections, with comprehensive usually giving the most coverage. You can add extras to these policies, which can change the price.

However, comprehensive isn’t always the most expensive. High-risk drivers used to choose third-party insurance because it was cheaper, but now insurers have adjusted their prices. So, third-party insurance isn’t always the cheapest option anymore.