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How Your Car Insurance Premium is Calculated

By: Jason Speedie

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Various facts about you and your circumstances are taken into consideration when your car insurance company works out how much to charge you for your policy. Here are some tips on how you can reduce your insurance premium and a brief guide to the main factors that are used to calculate the price you pay.

One of the biggest factors is where you live. Some places, especially urban areas and cities, have particularly high theft and vandalism rates, and the sheer number of cars in these areas increase the likelihood of accidents. Parking in a driveway, or even better, a garage, will make your insurance cheaper than if you park on the street. To counter the costs of living in a high risk area and to reduce the likelihood that your car will be stolen, get a car with an alarm and an engine immobiliser.

Your age, and the length of time you have been driving will also affect the price of your car insurance. If you are under twenty-five you are statistically more likely to have a serious accident than older drivers and the cost of your cover will reflect this.

If you are a young driver and your parents are prepared to add you to their policy, the additional costs may work out cheaper than a separate policy. There are advanced driving courses like Pass Plus which you can take to improve your driving and some insurers will give you a discount if you pass the course.

Your job will be taken into account, with actors and journalists typically paying more than say teachers and accountants. These differences in price are based on assumptions about how you might drive, the kind of places you might drive to and the sort of passengers you might have in your car.

Most policies have an excess, which is the amount you have to chip in towards the cost of any repairs. Typically this excess is about two hundred pounds, but if you can afford to make it a little higher your premium will be reduced.

If you cause no accidents and make no claims, you will eventually earn a no claims discount. If you have several years no claims, your premium will be a lot cheaper with some insurers taking up to seventy-five per cent off the full price for drivers with a good track record.

Even if you do have to claim, some companies will take into account your previous record so you do not lose your whole no claims bonus. For example, if you had four years no claims then had to claim, you might only lose two years from your no claims discount.

Look out for insurers that offer no claims bonus protection. Policies like this mean that if you claim only once in say five years, your no claims bonus is unaffected. They may cost slightly more but will ensure cheaper prices in the future if you do have to claim.

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