Which Factors That Affect Car Insurance Premiums

June 6th, 2024
Which Factors That Affect Car Insurance Premiums

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When it comes to car insurance, the price you pay can vary a lot from person to person. That’s because insurance companies look at a wide range of factors to work out how risky you are to insure. The riskier they think you are, the more you’ll pay.

Some of the key things they consider are your age, your driving experience, the type of car you drive, and even where you live. They’ll also look at things like your claims history, your occupation, and whether you have any points on your licence.

Key Highlights

  • Your age and driving experience are two of the biggest factors that affect your car insurance premium.
  • The make and model of your car, as well as any modifications you make to it, can also have a big impact on the price of your car insurance.
  • Where you live, how you use your car, and your occupation can all play a role in determining your insurance rate.
  • Having points on your licence will almost always increase the cost of your car insurance.

How Does Age Affect Car Insurance Premiums?

Age is one of the most significant factors that determines your car insurance premium. Insurers use statistical data to assess the risk of insuring drivers in different age groups.

Young Drivers Pay More

If you’re a young driver, especially if you’re under 25, you can expect to pay more for your car insurance. That’s because statistics show that younger drivers are more likely to be involved in accidents.

In fact, according to the Association of British Insurers (ABI), drivers aged 17-19 are three times more likely to be involved in a fatal crash compared to drivers aged 40-49. This higher risk translates into higher insurance premiums for young drivers.

Premiums Usually Decrease with Age and Experience

As you get older and gain more driving experience, your insurance premiums should start to come down. Insurers generally see more experienced drivers as less of a risk.

However, this is contingent on you maintaining a clean driving record. If you have accidents or receive points on your licence, your premiums could stay high even as you get older.

Older Drivers May See Premiums Rise Again

Interestingly, once you reach a certain age, usually around 70, your insurance premiums may start to creep up again. This is because insurers consider factors like slower reflexes, worsening eyesight, and an increased likelihood of medical issues that could affect your driving.

However, the increase for older drivers is usually not as steep as it is for younger drivers. And many insurers offer specialised policies for older drivers that can help keep costs down.

How Does Age Affect Car Insurance Premiums

How Does Gender Affect Your Car Insurance Premium?

Historically, gender was a significant factor in determining car insurance premiums. Statistics showed that men, particularly young men, were more likely to be involved in accidents than women. As a result, men often paid more for their car insurance.

However, in 2012, the European Court of Justice ruled that using gender as a factor in setting insurance premiums was discriminatory. Since then, insurers in the UK are no longer allowed to consider gender when calculating insurance rates.

Despite this change, there are still some interesting statistics about male and female drivers in the UK:

  • According to the Department for Transport, men drive on average 6,600 miles per year, while women drive 5,400 miles.
  • Men are involved in twice as many fatal accidents as women.
  • Women are less likely to have convictions for driving offences. In England and Wales, 92% of convictions for death by dangerous driving are against men.
  • However, women are more likely to make certain types of insurance claims, such as for accidental damage when parking.

While these statistics cannot be used to determine individual premiums, they do highlight some of the differences in driving patterns and behaviours between men and women.

It’s important to note that while insurers can no longer consider gender directly, they can still use other factors that may be correlated with gender, such as the type of car you drive or your annual mileage. Therefore, while the gender gap in insurance premiums has narrowed since the 2012 ruling, there may still be some differences on average between what men and women pay.

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How Does Driving Experience Impact Car Insurance Costs?

Alongside age, your level of driving experience is a key factor in determining your car insurance premium. Insurers generally view more experienced drivers as less risky to insure.

New Drivers Pay More

If you’re a new driver, regardless of your age, you can expect to pay more for your car insurance. Insurers see new drivers as high-risk, as they have little real-world driving experience.

According to the DVLA, one in five new drivers is involved in a crash within their first year of driving. This high accident rate is why insurance is so expensive for new drivers.

Premiums Decrease with Experience

The longer you’ve been driving, the more experience you gain, and this usually translates into lower insurance premiums. Insurers see experienced drivers as less likely to be involved in accidents, and therefore less risky to insure.

However, it’s not just about the number of years you’ve been driving. Insurers also look at the type of driving experience you have. For example, if you’ve only ever driven short distances in rural areas, you may pay more than someone with experience driving in busy cities.

No Claims Discount

One of the key ways that insurers measure your driving experience is through your no claims discount (NCD), also known as a no claims bonus.

Your NCD is the number of years you’ve been driving without making an insurance claim. For each claim-free year, you build up your NCD. The higher your NCD, the bigger the discount you can get on your car insurance.

For instance, if you have five years of claim-free driving, you could get a 60-75% discount on your premium, depending on your insurer. This can make a huge difference in your annual insurance costs.

However, if you do make a claim, you will usually lose some or all of your NCD. This is why it’s sometimes better to pay for small damages yourself rather than claiming on your insurance.

Advanced Driving Courses

Another way to demonstrate your driving experience and potentially lower your premiums is by taking an advanced driving course.

Courses like Pass Plus, IAM RoadSmart, or RoSPA Advanced Drivers are designed to improve your driving skills beyond what’s required to pass the standard driving test. They cover things like driving on motorways, at night, and in adverse weather conditions.

Many insurers recognise these courses and offer discounts to drivers who complete them. The discount you get can vary, but it’s often around 5-10% off your premium.

How Do Penalty Points Affect Car Insurance?

Penalty points, also known as endorsements, are issued for traffic offences like speeding or running a red light. They stay on your driving licence for 4-11 years, depending on the offence.

Having points on your licence can significantly increase your car insurance premium. Insurers see points as a sign of risky driving behaviour, which makes you more likely to be involved in an accident and make a claim.

Even One Point Can Increase Your Premium

Even a single penalty point can impact your insurance costs. Research by the Institute of Advanced Motorists (IAM) found that having one speeding conviction can increase your premium by 5%.

The more points you have, the bigger the impact on your insurance. The same research found that having six points on your licence can increase your premium by a whopping 25%.

Different Offences Carry Different Points

The number of points you get depends on the type of offence you commit. For example:

  • Speeding: 3-6 points
  • Using a mobile phone while driving: 6 points
  • Running a red light: 3 points
  • Drink driving: 3-11 points

More serious offences, like drink driving or causing death by dangerous driving, can result in a driving ban as well as points on your licence.

How Long Do Points Stay on Your Licence?

Most points stay on your licence for four years from the date of the offence, but they can stay on for up to 11 years for the most serious offences.

Your insurance premiums may be impacted for as long as the points remain on your licence. Even if you’ve had points for a few years, you may still be paying more than a driver with a clean licence.

Convicted Driver Insurance

If you have points on your licence, you might struggle to find affordable insurance. Many mainstream insurers will either refuse to insure you or charge very high premiums.

In this case, you might need to look for specialised convicted driver insurance. These policies are designed for drivers with points or convictions, and while they’re usually more expensive than standard policies, they can be more affordable than what you’d be quoted by a mainstream insurer.

How Do Penalty Points Affect Car Insurance

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How Does Your Car Affect Your Insurance Premium?

The type of car you drive can have a big impact on your insurance costs. Insurers consider a range of factors about your car when calculating your premium.

Car Value and Repair Costs

Generally, the more expensive your car is, the more it will cost to insure. This is because it would cost more to replace your car if it was written off in an accident.

Insurers also consider the potential repair costs for your car. Some cars are more expensive to repair than others, due to the cost of their parts or the complexity of their construction. Higher potential repair costs usually mean higher insurance premiums.

Car Performance and Power

High-performance cars with powerful engines are often more expensive to insure. Insurers see these cars as riskier, as they have the potential to be driven faster and are therefore more likely to be involved in accidents.

This is especially true for sports cars and modified vehicles. If your car has been modified to increase its performance, you can expect to pay more for your insurance.

Car Safety Features and Security

On the flip side, cars with good safety features and security devices can be cheaper to insure. Features like autonomous emergency braking, lane departure warnings, and blind-spot detection can reduce your risk of being in an accident, which can lower your insurance costs.

Similarly, cars with alarms, immobilisers, and tracking devices are less attractive to thieves, which can also result in lower premiums.

Car Age and Reliability

The age of your car can also affect your insurance. Newer cars are often more expensive to insure, as they have a higher value and can be more costly to repair.

However, very old cars can also be expensive to insure if they are considered less reliable or if their parts are hard to find.

Cars that are known to be reliable, like many Japanese models, can be cheaper to insure. This is because they are less likely to break down or need expensive repairs.

How Does Where You Live Affect Your Car Insurance?

Where you live is another significant factor in determining your car insurance premium. Insurers use your postcode to assess a range of risks.

Crime Rates

If you live in an area with high crime rates, particularly vehicle crime, you can expect to pay more for your car insurance. This is because there’s a higher risk of your car being stolen or vandalised.

Cities tend to have higher crime rates than rural areas, which is one of the reasons why urban drivers often pay more for their insurance.

Population Density and Traffic

Areas with high population density and heavy traffic congestion also tend to have higher insurance premiums. This is because there’s a greater likelihood of accidents in these areas.

If you live and drive in a city, especially during rush hour, you’re at a higher risk of being involved in a collision. This risk is reflected in your insurance costs.

Weather and Natural Disasters

Your local weather patterns and risk of natural disasters can also impact your insurance. If you live in an area prone to floods, storms, or other weather events that can damage your car, you may pay more for your coverage.

Parking and Garaging

Where you park your car overnight can also make a difference. If you have a secure garage or driveway, you may pay less than someone who parks on the street.

This is because cars parked on the street are at a higher risk of theft, vandalism, and damage from passing traffic.

How Does Where You Live Affect Your Car Insurance

How Do Your Occupation and Driving Habits Affect Your Insurance?

Your occupation and how you use your car can also impact your insurance premiums.

Occupations and Insurance Risk

Insurers consider some occupations to be higher risk than others. For example:

  • Journalists and entertainers often pay more due to their perceived lifestyle and the potential for driving at odd hours.
  • Jobs that involve a lot of driving, like sales representatives or delivery drivers, can also result in higher premiums due to the increased time on the road.
  • On the other hand, occupations like teachers, nurses, and civil servants are often seen as lower risk and may result in lower premiums.

It’s worth noting that insurers can’t discriminate based on things like race or religion. They can only use your occupation to assess your risk if they have statistical evidence to support it.

Mileage and Car Usage

How much you drive and what you use your car for can also affect your insurance costs.

If you have a high annual mileage, you’re likely to pay more than someone who only drives occasionally. This is because the more time you spend on the road, the higher your chances of being involved in an accident.

Using your car for business purposes, like transporting goods or visiting clients, can also lead to higher premiums. This is because business use is considered riskier than standard social and commuting use.

On the other hand, if you only use your car occasionally or for short trips, you may be able to get a low mileage discount on your insurance.

Driving Habits and Behaviour

Your individual driving habits and behaviour can also impact your insurance, especially if you opt for a telematics or black box policy.

These policies involve having a small device installed in your car that monitors your driving. It tracks things like your speed, braking, and the time of day you drive.

If you consistently demonstrate safe driving habits, you could see your premiums reduced. However, if the data shows that you often speed or brake hard, your premiums could go up.

Telematics policies can be especially beneficial for young and inexperienced drivers. They allow you to prove that you’re a safe driver, even if you don’t have many years of driving under your belt.

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How Can You Reduce Your Car Insurance Premium?

While many of the factors that affect your car insurance are outside of your control, there are steps you can take to potentially lower your costs.

Choose Your Car Wisely

When buying a car, consider the potential insurance costs. Cars with smaller engines, good safety features, and low theft rates are generally cheaper to insure.

Increase Your Voluntary Excess

Your excess is the amount you agree to pay towards any claim you make. By choosing a higher voluntary excess, you can lower your premium. Just make sure you can afford to pay the excess if you do need to claim.

Pay Annually

If you can afford to pay your insurance annually rather than monthly, you could save money. Many insurers charge interest on monthly payments.

Improve Your Car’s Security

Installing approved security devices, like alarms and immobilisers, could qualify you for a discount on your insurance.

Take an Advanced Driving Course

Completing an advanced driving course, like Pass Plus or IAM RoadSmart, could net you a discount on your premium.

Limit Your Mileage

The less you drive, the lower your risk of an accident. If you can keep your annual mileage low, you may pay less for your insurance.

Consider a Telematics Policy

If you’re a safe driver, a telematics or black box policy could help you save money. These policies base your premium on your actual driving behaviour.

Shop Around and Compare Quotes

Perhaps the most important tip is to always shop around and compare quotes from different insurers. Premiums can vary significantly between companies, so it pays to do your research and find the best deal for your circumstances.

The Benefits of Breakdown Cover

Many comprehensive car insurance policies include breakdown cover as an optional extra. This can provide peace of mind if your car breaks down unexpectedly.

Breakdown cover can include benefits like:

  • Roadside repairs
  • Towing to a garage
  • A courtesy car while yours is being repaired
  • Accommodation or onward travel if you break down far from home

While adding breakdown cover will increase your insurance price, it can save you money and inconvenience in the long run if you do encounter problems with your vehicle.

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The Different Types of Car Insurance Coverage

When looking for car insurance, it’s important to understand the different levels of cover available. The three main types of motor insurance in the UK are:

  1. Third Party: This is the minimum and lower level of cover required by law. It covers damage or injury you cause to other people and their property, but not damage to your own car.
  2. Third Party, Fire and Theft: This includes third party cover, plus protection against your car being stolen or damaged by fire.
  3. Comprehensive Cover: This is the highest level of cover. It includes third party, fire and theft, as well as damage to your own car, even if the accident was your fault.

Comprehensive cover is usually the most expensive, but it also provides the most protection. The level of cover you choose will impact your insurance price.

The Different Types of Car Insurance Coverage

Frequently Asked Questions

How can I lower my car insurance as a young driver?

  • Choose a car that’s cheap to insure, with a small engine and good safety features.
  • Consider a telematics or black box policy to prove your safe driving habits.
  • Take an advanced driving course, like Pass Plus, to gain experience and potentially get a discount.
  • Add an experienced named driver to your policy, like a parent.

Will my insurance go down when I turn 25?

It’s likely that your premiums will decrease as you get older and gain more experience. However, age is just one factor. Your driving record, claims history, and other factors will also influence your premium. Shopping around and comparing quotes is always a good idea, regardless of your age.

Do I need to tell my insurer about points on my licence?

Yes, you are legally obliged to disclose any points or convictions when you apply for insurance. If you don’t, and your insurer finds out, they could invalidate your policy or refuse to pay out in the event of a claim. If you’re not sure what to disclose, it’s best to check with your insurer.

Can I protect my no claims discount?

Many insurers offer an option to protect your no claims discount for an additional fee. This allows you to make a certain number of claims (usually one or two) without losing your NCD. However, your base premium may still increase after a claim, even if your NCD is protected.

What is the cheapest car to insure?

The cheapest cars to insure are usually small, low-powered vehicles with good safety ratings and low theft rates. Examples might include the Volkswagen Polo, the Nissan Micra, or the Skoda Citigo. However, the exact models can vary year to year, so it’s always best to check insurance costs before purchasing a car.

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