Insurers take into account several factors when calculating an insurance premium (an insurance premium is the price of a policy). The premium is fundamentally based on the amount of ‘risk’ involved in insuring an individual. Certain factors pose as higher risk than others. This is why there are so many questions asked prior to taking out a policy – the insurers need to paint a larger picture of who they are insuring. Regular insurance policies are based on live statistics and averages.
It is important that all questions are answered truthfully otherwise an insurance policy will be invalid. Here is a list of the main factors that are considered by insurers:
Age
Statistically, younger drivers are more likely to be involved in accidents and this is why they find their premiums cost more. Insurers take into account both the age and driving experience of the policyholder in generating a premium. The more experienced of a driver you are, the more your insurance premium will go down year on year. This continues until drivers get older, usually in their late 60’s, and then the risk starts increasing again, as does the price.
First insurance’s sister brand Autosaint offers telematics insurance for younger drivers in order to reduce premiums. To find out more about telematics or black box insurance, you can visit their website.
Where you live
Inner city neighbourhoods tend to pose a higher risk to insurers than rural areas. This is because there is likely to be a higher crime rate and a higher frequency of traffic accidents. In areas which pose more of a risk, you will pay more.
It is important that any changes in address are disclosed to insurers, as this will affect the policy. This may trigger an increase or decrease in the price of the premium.
It is important that any changes in address are disclosed to insurers, as this will affect the policy. This may trigger an increase or decrease in the price of the premium.
Your car
Cars can vary in a number of ways which affect insurance premiums: some are faster and more powerful – thus more statistically likely to be involved in an accident; some are posher and more sought after – thus more likely to get stolen; and some are more expensive and luxurious – meaning parts replacement and fixing costs will be higher.
Certain features inbuilt into a car could reduce premiums – such as autonomous emergency breaking, immobilizers, or tracking devices.
Where you leave your car when you aren’t driving it
A locked garage at home is the preferred location for insurers. A private driveway will also trigger a lower premium than parking on a public street, where damage is more likely to befall your car. This could also include your work address; insurers tend to ask where you park your car during the daytime.
When and how far you drive your car
The more you drive, the more likely you are to be involved in an accident. If you use your car for business purposes, you’re likely to pay more for cover, as you’ll be driving more when the roads are busy. Your annual mileage is also an important consideration.
No claims bonus
No claims bonuses are earned by completing a 12 month policy without having, or being involved in, any incidents that your insurance company have to pay out for. The more year no claims bonus you have, the better your price will be
Convictions & Claims history
Statistics indicate that those who have a motoring or criminal conviction are more likely to make a claim. This additional risk is normally reflected in a higher premium price.
External Influences
As well as personal information, insurers consider the rising costs of parts and labour, changes in legislation and the number of claims being made.
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