Car driving down road whilst sun is setting


Car Insurance Premiums

How car insurance companies calculate your premium

There are many factors that are taken into account when insurance companies calculate car insurance premiums. Car insurance premiums are based on a variety of statistics which are used by car insurance companies to create pricing algorithms. This enables them to create a balance between risk and cost.

The main factors that are taken into account include:

  • Age - Young drivers are statistically more likely to have an accident compared to older drivers, therefore they are seen as a higher insurance risk which will increase the car insurance premium.
  • Gender - Historically females got cheaper car insurance premiums than males, due to the fact that they generally drove less miles and claims bills were smaller compared to men. But in 2011 the European Court of Justice ruled this to be unfair and therefore insurance companies had to revise their premium structure.
  • Where the vehicle is kept - If the vehicle is kept in a garage over night then this is viewed as more secure than if the vehicle is kept on the street.
  • Car insurance group - Every car is classified into an car insurance group from 1-50. Therefore the higher the car insurance group the more the car insurance premium will be. Find out more with our car insurance groups article.
  • Excess - If you choose to have a higher excess then the cost of your overall premium can go down. An excess is a cost charged by insurers to the policy holder if you need to make a claim.
  • Occupation - Some occupations are considered to be a higher risk than others, statistically if your occupation means that you are likely to be on the road more then this could have an impact on your car insurance premium.
  • Annual mileage - If your annual mileage is high, again this could increase your car insurance premium.
  • No claims bonus - If you have not made a claim on your car insurance policy then it is possible to build up a no claims bonus (NCB). This means that a discount is applied to the premium. The discount depends on the insurance company. Read our article about no claims bonus to find out more.
  • Endorsements and penalty points - Existing penalty points and endorsements can result in higher car insurance premiums as you are viewed as a higher risk.
  • Existing claims - If you have had a recent accident then again this is considered when the car insurance premium is calculated.