Car insurance premiums are calculated based on rating factors, pricing for certain risk factors and the number and cost of claims.
All insurance companies weigh these factors differently and this is why you may find that car insurance quotes differ between different insurance companies.
We’ve compiled a list of the different factors that could impact your motor insurance premium so you can understand how your car insurance quote is calculated.
Type & Age of Your Vehicle
The make and model of your vehicle are important factors as cars are categorised into insurance groups to calculate premiums. These insurance groups are categorised from 1 to 50, with the cars categorised between 1 and 10 normally being the cheapest to insure.
The groups are determined by the following factors - the value of the car as new, repair costs and time, performance and safety & security features. Insurance companies will also look at past claims from similar vehicle makes and models to help them determine repair costs and theft rates.
The age of your vehicle may also have an impact on the premium. Older cars can sometimes cost more to insure as the parts may be hard to source when repairing and the car may not be fitted with modern safety and security features.
No Claims Bonus
If you have submitted or processed a claim within the previous 12 months, you may have lost your no claims bonus, which may result in an increased insurance premium. It’s important to also keep in mind that if you have made any claims within the last 5 years they can still influence your premium until your no claims bonus is built back up.
On the other hand, having multiple years claims-free will increase your no claims discount which will, in turn, lower your car insurance premium. In fact, AXA provides a no claims bonus for every year you don’t make a claim up to a maximum of 5 years, offering you up to a 75% discount on your premium when you’re 5 years claims-free.
Age of Driver & Driving Experience
Young drivers are deemed to pose a higher risk for car accidents as they are less experienced, and so, they will have higher car insurance premiums. Older drivers who are claims free and have more driving experience will benefit from lower premiums.
The number of years that you have held your driving licence for may also affect your insurance premium as it’s a good indicator of driving experience.
Your Annual Mileage
Your annual mileage is used by insurers to calculate your premium as it is a good indicator of how much driving you do.
As the likelihood of being in an accident lowers the less you drive, it stands to reason that a low annual mileage can lower your car insurance premium. On the contrary, the higher your annual mileage, the more potential there can be for a higher insurance premium.
Where Your Car Is Kept
Where you park your car overnight or during the day can impact your car insurance premium. Insurers will check statistics about your area such as crime rates, how busy the area is, general driving behaviour in the area and the average number of claims made, to determine how likely it is that a claim may occur.
For example, it can be deemed a higher risk to park your car on the street rather than on your driveway or in a garage, so if you park on a street it may cause an increase in your insurance premium.
Your Occupation
Your occupation and use of the vehicle will have an impact on the insurance premium. There are a variety of rating factors taken into account with regard to occupation & use when calculating premiums, such as, if you use your car for business use, mileage and the type of occupation. It’s important to be honest about your occupation so that your policy premium is calculated accurately.
Penalty Points
Your driving record and whether you have penalty points or not will affect the price of your car insurance premium. Drivers without penalty points will often benefit from a discount from insurers, while those with penalty points may pay a higher insurance premium.
The Number and Cost of Claims
Insurance companies need to set premiums at a level that will ensure they can cover the cost of claims. If the number and cost of claims increase, you can expect insurance premiums to also increase.
The cost of claims is comprised of the pay-outs for injury claims, medical inflation, legal costs and the costs of repair, e.g., parts and labour.
