10 Key Factors That Affect Your Insurance Cost

Insurance is one of the biggest costs associated with driving. But, it does help keep you safe and secure if the worst happens. With car insurance, if your car is damaged or stolen, you insurer will pay the bill. They’ll also cover the cost of third-party damage. It keeps your bank account safe from huge payments after an accident. It’s also a legal requirement.


However, you’ll notice that some insurance premium rates are higher than others. Why is that? Insurers calculate the risks associated with your driving. The higher the risk of accident or theft, the higher your premium. So, let’s take a detailed look at each of the factors.

  1. Type of insurance

First of all, the type of insurance you choose drastically affects your premium cost. The bare minimum coverage is called ‘third-party’ coverage. It pays out for the cost of damage to other parties if you’re involved in a collision. But, you’re liable for all the costs to your own car. This is the cheapest option. Next, there is ‘third-party fire and theft’ which is the same as above, but with additional coverage for fire and theft. Lastly, there’s ‘fully comprehensive’, which covers everything. Naturally, this is the most expensive option.

  1. Voluntary excess

The voluntary excess is the figure you pay before the insurance kicks in. Let’s say you crashed your car, causing £1000 worth of damage. If your voluntary excess is set at £500, you’ll pay the first £500. The higher you set the excess figure, the lower your overall premium, as you’re assuming some of the risk.

  1. Age

Insurers use average statistic to determine how much risk is associated with your driving. One of the biggest factors is age. According to statistics, young people are significantly more likely to be involved in an accident. That means your insurer is more likely to pay out for young drivers. That risk is reflected in your premium cost.

  1. Location

Again, location is a big factor that contributes to your driving risk. For example, if you live in a densely populated, urban area, you’re more likely to be involved in an accident. You’re also at a higher risk of theft. Insurers use local crime rates and collision statistics to determine how much your location affects your cost.

  1. Occupation

If your profession requires regular use of the roads, you’re considered a high-risk driver. If you’re on the road all day for your occupation, your premium rate will jump up dramatically. If you work from home, or rarely use the car, you’ll get an insurance break. Some insurers even consider doctors, paramedics, and police officers as safer drivers too.

  1. Size and power of your car

This one is simple physics. The bigger and more powerful your car, the more destruction it will cause in a crash! It’s more likely to cause expensive damage to other vehicles and road users. That means a bigger payout from your insurance company. Smaller cars, on the other hand, enjoy a lower rate.

  1. Age of your car

In general, older cars are cheaper to insure. The reason for this is simple. If they’re involved in an accident, they’re much more likely to be ‘written off’ or ‘totalled’. That means the cost of damage exceeds the value of the car. Rather than repair it, it will simply be discarded, ie. the insurance isn’t needed.

  1. Safety rating

This one is nice and easy to understand. The higher your car’s safety rating, the lower the premium. Modern safety ratings now reflect your car’s ability to actively avoid accidents. Some modern car technologies are revolutionary. Features like stability and traction control help drivers avoid collisions, and retain control. Naturally, insurers are likely to reward drivers with safer cars.

  1. Security

According to Lucas Velez from ComparaEnCasa, theft is one of the biggest problems for car insurers. If your vehicle is stolen, the insurance company is liable to pay out to cover the cost. With that in mind, insurers reward drivers that install extra security features. Things like alarms, immobilizers, and trackers are great here.

  1. Driving history

Lastly, insurers will look at your personal driving history. If you have a clean record, they can generally assume you’re a safe and careful driver. If you’ve never claimed on the insurance before, it means you’re a much lower risk to the insurance company. Most insurers offer a ‘no claims bonus’ for careful drivers.

So, now you know the 10 most important factors in calculating your car insurance premium. In some cases, you can actively cut the costs by making the right decisions. Where could you save money?