Insurance policy costs continue to rise for many motorists, and given the current climate it’s worth reminding you how policy premiums are calculated. Insurance companies take a wide range of factors into account, not least the likely costs of any claims you may make, and how likely you are to make one in the first place.
1. Driver’s age
Naturally, companies are more likely to charge younger drivers a higher premium. This is based on several things, notably the higher incidents of accidents among drivers under 25.
These are often caused by inexperience behind the wheel, drivers who show off to their friends, drivers who pass their test after few lessons and are not overly well prepared for the road, and high speeds.
Not all young drivers are careless, and indeed senior motorists can face rising insurance costs for age or health-related factors.
Note that when you reach 25, you may not actually see your premium drop. There are ways to lower costs, including fitting a box that monitors your driving habits or building up no claim bonuses.
2. Vehicle
If you drive a very expensive car, it will cost more to repair or replace in the event of an accident, and may be more likely to be stolen.
Other factors are also important – if your vehicle has been modified in any way this can lead to raised premiums.
High-powered sports cars and hot hatchbacks traditionally attract higher costs. Improving your vehicle’s security, keeping it locked up at night and other factors such as your home address can help mitigate some of these costs. New and used cars also tend to attract similar premiums.
3. Driver’s occupation
Did you know that changing job can change your insurance premium? Insurance companies place some jobs as a higher risk than others; for example if you’re involved in the motor trade, spend a long time travelling on the roads, or transport valuable items.
Don’t falsify your occupation, as in the event of an accident or claim those false details can not only lead to high costs and embarrassment, but may also be illegal; remember that your insurance documents are legally binding and you have signed a declaration of facts.
4. No claims bonus (NCB)
No claims bonuses are a way to reward drivers for a safe record over the years; however these can be adversely affected even if you’re not totally at fault for a claim.
Partial fault, or a perceived injustice, will see your bonus removed or lowered; usually you are allowed to pay a small extra premium which protects your bonus for 1 or 2 claims within a certain time period.
As you build up the NCB, your premium will be discounted more.
5. Use of your vehicle
Those who use vehicles to commute or as part of their job will see higher premiums than those who use public transport or work at home.
Be honest with your declarations, as you may find your cover invalidated if you say you don’t use your vehicle for work, but are then involved in a work-related incident or aren’t covered when driving on trade plates.
It’s also important to be accurate with your annual mileage estimate.
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6. Where you live
Postcode desirability is a big thing in the housing market, but it can also have a bearing on your vehicle’s premium. If you live on a busy road, close to known blackspots, or in an area with high crime rates, your premium will probably be much higher than a similar vehicle which is kept in a quiet neighbourhood.
7. Excess and policy types
By accepting a higher “excess” or amount that you’re prepared to cover yourself in the event of a claim, you can shave money off your policy.
You can also save money by taking out different levels of cover, though we would recommend fully comprehensive cover in most cases. Third party cover will not protect you if you’re at fault for a major incident.
