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How is car insurance calculated?

car insurance calculated

Get the lowdown on how car insurance companies determine how much to charge you for your car insurance.

Car insurers can’t tell if you’re a safe or reckless driver without any previous driving history, so they base their quotes on statistical data from all their customers, and work out the risk you typically pose.

Ultimately it is down to your risk factor to the company, and how likely you are to make a claim.

Remember that each insurer is different so it pays to shop around and compare car insurance quotes from different providers. Some may be more favourable to the age you are, or the fact that you haven’t claimed recently for example.

Factors involved to calculate your car insurance:

  • Age
    Age is a big factor that insurers use to calculate car insurance. Statistics show that young inexperienced drivers between the age of 17 – 25 are most likely to have accidents and therefore receive higher premiums. But everybody has to start somewhere…Read our article on young drivers to see other ways you how you can save on your car insurance.


  • Your driving history
    When you take out a car insurance policy you will be asked about your driving history. If you are a safe driver and haven’t made any claims you will be rewarded with lower premiums via a No Claims Bonus.
  • Your car
    The type of car you drive will affect how much you pay on your premiums.

    - Value: The more expensive your car is, the more it would cost to replace if stolen or damaged.
    - Power: The faster and more powerful your car is, the more likely it is to be involved in accidents.
    - Desirability: If you own a particularly nice car or own a model with a high theft record your insurer may consider you at greater risk.
  • Car use
    You will have to provide your annual kilometres to the insurer. If you do not drive your car very much then you will be less likely to have an accident and therefore have lower premiums.
  • Car location
    Premiums vary based on your postcode since different locations have known high or low theft risks and accident risks. Where you park your car when it’s not in use can also impact your premium. A car parked in a secure garage is less likely to be stolen than a car parked in the street.
  • The old ‘increase your excess’ trick
    The higher the voluntary excess you agree to, the less your insurance premiums will cost. However if you do make a claim, you will have to pay more then.
  • Named drivers
    Additional drivers you add to your policy could help you to reduce your premiums or increase them depending upon their risk profile.

For more ways on how to save on your car insurance see our tips on cheap car insurance.

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