How Car Insurers Calculate Premiums – and What You Can Do to Save Money

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When it comes to how much you’ll be paying for car insurance, insurers consider a whole lot more than how long you’ve been driving.

Understanding the factors involved in calculating a premium can make a world of difference when you’re hunting out the best price -- as a few simple changes to your habits can bring costs tumbling down.

Firstly, you need to think about the vehicle that you’re seeking to get protected. Naturally, attempting to insure a Ferrari is going to be a lot pricier than a Peugeot. The car will have cost more to purchase, and the parts may be trickier and more expensive to replace.

Unfortunately, even getting an older car may not help your premiums plummet. That’s because it’s usually harder to replace the body frames on vehicles which haven’t been newly produced in a while, and their security features may not be up to scratch compared to modern standards. As such, it’s often best to go for a compromise between old and new.

How Your Motoring History Can Influence Your Premiums

Any insurer that’s worth their salt is going to want to know a little bit about your background before offering up a quote. This will likely involve looking at the history of your claims over the past five years or so. Unfortunately, in the insurance world, past behaviour equates to future risk.

Being a new driver is tricky for this very reason. As you have no history for an insurer to rely on, it’s difficult to predict future behaviour -- making you an unknown quantity and a greater risk.

Worse still, the statistics for younger drivers are not promising. Given their inexperience, new motorists are involved in one in four serious accidents -- even though they only account for one in eight licence holders. Research from the Association of British Insurers also suggests that 20% of young drivers will be involved in a crash of some kind within six months of passing their test.

The most disastrous death knell for cheap cover is getting a driving conviction. Having serious offences on your record, including using your phone behind the wheel or speeding, will likely add hundreds of pounds to your premium -- and in some cases, it may even prevent you from being able to get the more comprehensive types of cover out on the market.

Think Carefully about How You Use Your Car

If you’re in an occupation where you need to transport valuable equipment in your car, this will likely set off alarm bells for insurance companies. That’s because it makes your car a more desirable target for thieves.

Making sure that you take extra precautions when it comes to security -- such as a state-of-the-art alarm or an immobiliser on your steering wheel -- will help assuage their fears.

You should consider using a black box if you’re a new driver, as it helps you to build up a reputation and it may lead to discounted rates sooner. However, insurers will be able to monitor your habits closely -- and risky behaviour such as high mileage or driving at night could work against you.

Where You Live… and Park Your Car

Crime statistics are often included in the algorithms used by insurers. They look at the streets where the most thefts occur, or where the greatest number of accidents happen. Parking your car in a well-lit area often puts companies at ease -- or better still, keeping it tucked away in a garage.

As you’ll notice if you play around with a price comparison website, even just a couple of hundred metres between addresses can have a dramatic effect on the premiums offered. It’s all about statistics, and quotes between companies often vary so wildly because they also draw on their own data as well as information that’s publicly available.

A Top Tip: Always Tell the Truth

No matter what type of insurance you try to get in life, there are inevitably going to be some difficult questions -- and there may be times when you know that answering honestly will cause your quote to rise.

However, it’s important to remember that withholding key information about driving convictions, having policies refused, or past claims could have major consequences if you are seen to deliberately mislead an insurance company.

Don’t forget: one way to make sure that you’re opting for the most affordable cover is to carefully consider how much insurance you need. Whereas there is always the risk of underinsurance, sometimes it’s also possible to sign up for protection that it’s extremely unlikely you’ll ever require.

Taking a realistic approach to what you want from a policy, and putting yourself down to accept a higher, yet affordable excess when you need to make a claim, can help you get car insurance at an agreeable price.

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