The Key Factors That Determine Your Car Insurance Rate

How are your rates calculated? Let’s take a look at some of the main factors.

Any car owner knows that the ongoing costs of keeping your car on the road can really add up. Between fuel, parking, tax and maintenance costs, your monthly outlay can end up being substantial. And, of course, another important cost of running your car is insurance. It goes without saying that most car owners look for the best insurance deals on offer to get the best cover without breaking the bank.

But how are your rates calculated? While some factors, such as age, are beyond your control, others are based on behavior and may be within your power to influence. So let’s take a look at some of the main factors that go into determining your car insurance rate.

Age, Gender And Years Of Driving Experience

One of the biggest factors in determining your car insurance rate is your age. This may feel unfair, as there’s absolutely nothing you can do about it. Generally it’s assumed that younger people with less experience behind the wheel are more likely to be in an accident and more likely to claim on their insurance. For most insurance companies there’s a significant drop-off in premium rates once a driver hits 25 years of age. However, what’s really being assessed here is experience. This means that even mature drivers may face high insurance rates if they didn’t get their license until later in life and don’t have many years’ experience on the road. Since 2012 the UK has followed the EU’s discrimination laws that have stated that gender cannot be used as a determining factor in setting insurance rates. While it’s always possible that this ruling is overturned in the future, at the moment car insurers in the UK shouldn’t be using gender as a factor in your rates.

Driving History

This one stands to reason: drivers with a history of safe driving and who seldom or never make claims are given better rates. Essentially, the way you’ve driven in the past is used as a predictor of how you’ll drive in the future. The obvious tip here, then, is to consistently drive as safely as possible. But while that’s easy to say it can be harder to maintain in real life, where all kinds of unexpected incidents can occur. Of course, what insurance companies really care about is the claims rather than the incidents themselves. For this reason some drivers may choose to pay out of pocket for smaller issues rather than making a claim, which then protects their no-claim history. If you have accrued a number of years without making a claim, you may also want to consider the type of insurance you’re paying for. Many insurers offer ‘no-claims bonus protection’ which comes at an extra cost but allows you to make a limited number of claims without losing your no-claim bonus.

Your Car

The car itself is a major factor in determining how much it will cost to insure. Let’s look at a number of elements that will affect your overall rate.

  • Value - Obviously a brand new Mercedes is going to cost more to repair or replace than a ten-year-old family hatchback.
  • Mods and Extras - Optional extras such as a good sound system or performance mods may increase the value of your car, and therefore your insurance rate.
  • Power - Cars with powerful engines are more likely to be involved in accidents and so are more expensive to insure.
  • Safety Features - Finally, something that may actually lower your rates! Having safety features such as alarms, cameras and collision radas can improve your insurance rate.
  • Desirability - Driving a desirable car can put it at increased risk of theft, and therefore raise your insurance rate.
  • Own or Lease - When you rent out a car the lender may insist that you take a higher coverage type than you would have chosen yourself. If you own your car then obviously you can choose whichever coverage suits you best.

Your Lifestyle

Your insurance company will look into two of your lifestyle factors: professional and financial. For example, your job title may raise or lower your insurance rate. This is because certain occupations spend more time on the road, drive more at night, carry important equipment, or work in high-risk areas. While it may seem unfair that some jobs are considered to be more high-risk than others, it’s important to be honest and accurate when registering with your insurance company, otherwise you could invalidate your policy.

Your credit history will have a significant effect on your insurance rate. Statistics show that people with poor credit tend to make more claims than people with good credit. This means that some insurance companies will have rates that are almost twice as much for drivers with poor credit.

Where you live is another determining factor for your rates. If you own your home then you may get a break on your car insurance, especially if you get home insurance from the same provider. Your address will also be a factor; rates will be higher if you live in an area with more reported incidents of crimes such as vandalism or theft. Parking in a garage is considered safer than parking on the street and may also benefit you. How far you drive is also a consideration: if you have a long daily commute then you’re spending more time on the road – and high-mileage drivers generally have to pay more.

So What Can I Do?

As we’ve seen, there are many factors that contribute to your insurance rates. While it’s helpful to understand how the calculation is made, many of these factors are outside of your control. No one is going to move house or change jobs just to get better car insurance, and no one chooses to fall behind on payments or have a poor credit score.

However, not all insurance providers approach these factors in the same way and so will offer different rates based on their assessment of the risks. The best thing you can do is to compare the level of coverage and rates from a number of providers before you buy any insurance. Luckily, there are a number of UK-based price comparison websites that can help you to find the best deal before you commit.

This article was brought to you by Quick Car Finance, a leading UK car finance company for new and used cars.

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