With the cost of motor insurance having risen by record amounts in recent years, most drivers are desperate to keep their premiums under control. No matter what premium you are searching for, business, sports even drivers with over 10 years experience are seeing premiums rise. If you have some idea of the factors which are used by insurers to set policy costs, you can take action to ensure your own cost of cover is as low as it can possibly be.
Ultimately, the amount charged by an insurance company in motor premiums is a reflection of how likely any particular driver is to make a claim, as well as how expensive that claim is likely to be.
Some of the factors involved in these calculations you can’t do much about, such as your age and gender. But there are others – say, the type of car you drive, and how much you use it – that you do have some sway over.
Bear in mind that different insurers treat these factors in different ways: this is why it’s always a good idea to shop around and get quotes from as wide a range of providers as possible. For example, some insurers may penalise you more for your age, or for making recent claims, than others.
Your age
From you application form, an insurer can’t tell whether you are a cautious or reckless driver (unless you’ve made lots of claims before or have points on your licence), so it has to use statistical data from across all its customer base to work out what kind of a risk someone like you typically poses. One of the most significant factors in this calculation is age: the statistics show that young drivers, for example, are more likely to be involved in accidents and to make claims than other age groups.
This is why those aged between 17 and 25 generally face the highest premiums. You can’t change your age, but read on to find out what steps younger drivers can take to keep their insurance costs under control. Also the type of premium you choose has an effect on your policy cost.
Your gender
Statistics show that women tend to make fewer claims than men, and that the claims they do make are less expensive. This has long been reflected in lower premiums for female drivers: if a man and a woman of the same age and background, with the same car and claims history, applied for a policy, the woman would face lower costs. However, a ruling by the European Court of Justice in March 2010 said that insurers could no longer use gender as a factor in setting premiums.
This ban on gender-pricing is due to come into effect in December 2012. It’s not yet clear what will happen to premiums, but many industry experts think that women’s insurance costs will rise substantially, while men’s costs could fall by a smaller proportion.
Your occupation
What you do for a living can also have an impact on the size of your premiums. Insurers’ figures may show that certain jobs carry with them a greater risk of claims. If you can describe your job in more than one way (for example, bricklayer rather than builder, or barrister rather than lawyer) it could be worth trying both descriptions on your application to see if they affect your premiums.
The car you drive
The vehicle you are insuring has a large bearing on your insurance premiums, as you would expect.
- Value: The more expensive your car is, the more it would cost to replace if stolen or written off in an accident – so the higher the premiums.
- Pricier vehicles may also cost more to repair, particularly if they are rare and the cost of spare parts is higher than for other makes and models. But don’t assume that just because your own car isn’t worth much, it will be cheap to cover: remember, insurance is not just for damage to your own vehicle, it is also designed to protect other road users against any accidents you could cause.
- Power: The faster and more powerful your car is, the more likely it is to be involved in accidents – and the more costly those accidents are likely to be. That’s why vehicles with larger engines cost more to insure. If you modify your car to make it more powerful, you should inform your insurer: it will probably increase your premiums, but if you don’t tell them, your cover could be rendered invalid if you come to make a claim.
- Desirability: If you own a particularly desirable car, your insurer may consider you at greater risk of theft and increase your premiums accordingly. Increasing your vehicle’s security can help offset this.
Where you live
Your postcode also has a bearing on the cost of insurance: if you live in a built-up area where the risk of accidents is greater, you’ll pay more – as you will if you live somewhere that has high levels of vehicle crime.
How you use your car
If you use your vehicle for commuting as well as for social reasons, you are likely to pay more for cover as you’ll be driving more when the roads are busy. Your annual mileage also has a bearing: after all, the more you drive, the more likely you are to be involved in an accident.
Your motoring record and no-claims bonus
One of the most significant factors in calculating your cost of cover is your claims history, and whether you have any endorsements on your licence. Your insurer will ask for details of any claims in the past five years: you’ll have to state what the value of the claims were, and whether you were at fault. (Even if you weren’t at fault, the claim will still probably push up your premiums to some extent.)
If you haven’t made any claims for a year or more, you should have some form of no-claims bonus. Most insurers will accept up to five years’ worth of no-claims, and this can result in discounts of up to 70 per cent with some providers.
Your excess
The higher the voluntary excess you agree to, the less your insurance will cost. For example, if you choose a voluntary excess of zero, your insurer knows that for every claim you make, it will have to pay the whole amount (less any compulsory excess). But if you set your voluntary excess, your insurer knows that its potential payouts will be reduced, and also that you’ll be less likely to claim – any low-value claims will be uneconomical from your point of view.
The type of cover you buy
Comprehensive insurance is normally more expensive than third-party or third-party, fire and theft, because your provider will potentially have to pay out in a greater range of circumstances.
With third-party cover, your insurer knows it will only be liable for damage caused by you to other road users – and not for damage caused to your own car or injuries you yourself, or your passengers, sustain.
Who else is insured to drive your car
The named drivers on your insurance policy can cause premiums to rise and fall. If you’re an experienced driver, adding a young motorist – such as your son who’s just passed his test – to your policy can cause the cost to rocket. Conversely, if a young main driver adds a more experienced relative to their policy, it can reduce the costs.
