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Every driver wants to find a cheap car insurance policy that doesn’t skimp on cover. But calculating car insurance premiums is a tricky business.
Insurers consider a range of factors when working out how much to charge you for cover. They also use statistics from across the insurance industry and data from their own claims.
There are about 200 car insurance companies in the UK. Some target certain types of customers and price themselves out of the market for other demographics. This means the cheapest insurer for one driver might not be the cheapest for another.
Once you understand how car insurance works and premiums are calculated, you can take steps to find the best possible price for the level of cover you need.
A car insurance calculator is a comparison tool that allows you to get a general idea of how much cover will cost. You’ll need to input details about yourself and your car to get estimates of car insurance costs.
Insurers consider several factors when calculating car insurance premiums. Some of these relate to you – such as your age and occupation – while others relate to your car and where you live.
Insurers use actuarial risk tables based on years’ worth of data to understand the different risks for each group of people.
These statistics help them to work out how likely you are to make a car insurance claim and how much it will be. The higher the chance you’ll claim on your cover and the more expensive that claim is likely to be, the more you’ll pay for car insurance.
The following table summarises the factors that influence your car insurance premium and are explained in more detail below.
| Factors that will make your car insurance premium go up | Factors that will make your car insurance premium go down |
|---|---|
| Youth | Getting older |
| Lack of driving experience | Years of driving experience |
| Past claims | Building a no claims bonus |
| Speeding and other motoring convictions | Keeping a clean licence |
| Having a high-risk job | Having a low-risk job |
| Staying single | Getting married or cohabiting |
| Living in a high crime area | Living in safe area |
| Parking your car on the street at night | Parking securely |
| Owning a powerful or expensive car | Driving a car in a low insurance group |
| Modifying your car | Adding security devices to your car |
| Adding multiple optional extras | Limiting the add-ons you include |
| Reducing your voluntary excess | Increasing your voluntary excess |
| Paying monthly | Paying annually |
New drivers of any age lack driving experience, making them less likely to spot hazards. But according to road safety charity Brake, younger drivers pose an even bigger risk for insurers due to the combination of youth and inexperience.
According to the Association of British Insurers, drivers aged 17 to 24 are involved in 24 per cent of all fatal collisions, yet they only make up 7 per cent of UK licence holders.
Their youth means young drivers are particularly likely to take risks such as dangerous overtaking or speeding. Their inexperience means they need to concentrate more when driving, which makes them more susceptible to distraction, such as from mobile phones.
Brake’s statistics show that one in five drivers crash within a year of taking their test. While young men are more likely to have an accident than young women, car insurers are no longer allowed to consider gender when pricing policies.
When analysing claims data, insurers have seen that people with certain jobs make more claims than drivers in other occupations.
Premier League footballers pay the highest car insurance costs. This could be because they tend to drive high performance cars, take risks and are usually under 25.
Other occupations where people are charged more for car insurance include journalists, fairground workers and food delivery drivers.
But secretaries, personal assistants, insurance workers, librarians and teachers tend to have the cheapest car insurance.
While you shouldn’t lie to your insurer about your occupation, sometimes tweaking your job title – from journalist to content writer, for example – can result in cheaper quotes.
The car you drive has a big impact on your insurance. If your car were to get stolen or written off after an accident, your insurer would have to pay to replace it. The more this would cost, the higher your premium will be.
Insurers also look at the cost of parts and repairs when calculating premiums – if your car has expensive parts, insurance will cost more.
Modifying your car will mean paying more for insurance, while installing a tracker or other security device will result in paying less.
All cars are categorised into insurance groups from one to 50 – the more powerful and expensive your car, the higher the insurance group, and the more you’ll pay. Cars such as the Fiat Panda, Ford Ka+ or Nissan Micra are in Group 1 and are the cheapest to insure. Cars such the BMW 2 Series Coupe and Audi RS 4 Avant are in Group 50 and the most expensive to insure.
Your postcode impacts your car insurance premium, as it’s assumed you’ll keep your car at your home and do most of your driving close to where you live.
Insurers will look at whether you live in an urban or rural area and the crime rates in your area to assess how likely it is that your car will be vandalised or stolen. According to vehicle tracking company AX Track, the highest number of cars are stolen in London and the West Midlands. So you’ll likely pay more for car insurance if you live in these areas.
Road accident statistics also help insurers predict how likely you are to be in an accident.
Insurance companies will also want to know where you keep your car during the day and at night – parking in a garage or secure car park will result in cheaper premiums than parking on the road.
Insurers look closely at your driving history when calculating your premium. If you’ve claimed on your insurance in the past, your premium will go up. An accident typically stays on your driving history for three to five years. The more the claim was for, the more it will impact your future premiums.
Speeding convictions will also result in higher car insurance, while convictions for drink driving or using your mobile while driving will have an even bigger impact.
In general, married people and those cohabiting tend to get cheaper car insurance rates than single people.
That’s because industry statistics suggest that couples and families make fewer expensive claims than single people.
While all of the above helps decide what the insurance company charges you, how you design your policy also plays a big part in what you end up paying.
First of all, choosing between third party-only cover, third party, fire and theft, and fully comprehensive car insurance will dictate your price. And while you might think third party is more expensive than comprehensive, most of the time that isn’t the case.
The risk profile of someone who only opts for third party cover is higher than someone who chooses a comprehensive policy, meaning the former is normally more expensive than the latter.
Other elements of your policy can also change the cost, including:
There are factors that will dictate the cost of your car insurance that are completely separate to your profile as a driver. These include:
There are so many factors that go into calculating your car insurance that quotes will vary wildly from person to person.
However, it’s useful to know the averages, so you have a benchmark price to compare your quote against:
Based on annual car insurance policies bought through MoneySuperMarket between October and December 2023
There are several things you can do to cut the cost of car insurance.
Be organised
You’ll get the cheapest car insurance premiums if you buy your cover three or four weeks before the renewal date. Leaving it until the day before will result in the cost shooting up.
Add a named driver
If you’re a young or inexperienced driver, you can usually reduce your car insurance premium by adding an older, more experienced named driver, such as a parent or partner.
Drive less
You’ll need to state your estimated annual mileage when you buy car insurance – this figure will be on your MOT certificate. Low mileage means fewer chances of an accident and, in turn, cheaper car insurance. You may even be eligible for a specialised low-mileage car insurance policy.
If you don’t drive much, a pay-as-you-go car insurance policy where you pay a set amount for each mile you drive could also reduce your costs.
Insure more than one car
Some insurers offer discounts if you insure more than one vehicle registered at the same address. Don’t assume these policies will be cheaper though – compare quotes for multi-car policies with single-car policies.
Keep a clean licence
Points on your driving licence for speeding, driving under the influence of alcohol or drugs or using your mobile while driving will result in paying more for insurance.
Build a no claims bonus (NCB)
If you don’t make a claim on your car insurance policy, you can build a no-claims bonus each year. This can be transferred between insurers at renewal time, and once you have a few years’ NCB, there’s an option to pay to protect it so one small claim doesn’t set you back to zero.
Get a black box
A black box or telematics insurance policy involves installing a device in your car that monitors your driving habits and sends this information to your insurer. If you drive safely, you’ll get cheaper cover.
Shop around for cover
Compare quotes from different insurers before buying a policy – they can vary by hundreds of pounds. It’s best to go fully comprehensive; this won’t necessarily cost more than third-party cover, but it’s much better.
Don’t auto-renew
Your insurer will send you a renewal quote about a month before your policy is due to end, but you don’t have to accept this quote. Some insurers also set up your policy so it auto-renews when it expires. While this might sound convenient, it could mean paying more than necessary.
Pay annually
Car insurance premiums are quoted as an annual figure, but you’ll have the option to pay monthly. Be aware that this can work out more expensive, as the insurer is effectively loaning you the full premium and you’ll be paying the sum back with interest.
Choose a cheap car
If you’re buying a new car, pick one in a low insurance group. Cars in Group 1 are a lot cheaper to insure than cars in Group 50.
Cut down on extras
Optional add-ons, such as a courtesy car, breakdown cover or legal expenses, will make your policy more expensive.
Increase your excess
The excess is the amount you’re required to pay in the event of a claim. You can pay an additional voluntary excess to get cheaper premiums – just make sure it’s not an unaffordable amount.
There are a few alternative ways you can get lower car insurance quotes.
Improve your credit score
Having a poor credit history could mean you may pay more for car insurance. This is because insurers consider people with a bad credit history more likely to make car insurance claims.
A low credit score could also mean paying a higher annual percentage rate if you choose to pay your car insurance monthly rather than annually.
Get a freebie
Price comparison websites often offer vouchers or gifts when you buy car insurance. These deals change regularly, so it’s worth comparing what’s on offer. Another option is to get cashback from TopCashback or Quidco by using these sites to click through to the price comparison site – cashback sites get a commission if a click results in a sale, and they split this money with customers.
Become a better driver
There are a couple of advanced driving courses you can take to improve your driving skills. Pass Plus is endorsed by the DVSA, while the Advanced Driver Course is run by IAM RoadSmart. These will get you a discount with some insurers and lower the chance that you’ll make a claim and lose any NCB you’ve built up.
However, if the main aim of you taking one of these courses is to lower your premium, you should check that your chosen insurer accepts the course first.
Calculating the cost of learner driver insurance can be tricky, as it will vary between insurance companies. Make sure you shop around for the best deal.
Yes, you can use a calculator for multiple cars, but it’s important to note that some insurers, such as Direct Line, offer a discount if you insure more than one car. Make sure you compare multi-car insurance with separate cover for each vehicle when you use a car insurance calculator.
If your car insurance thinks your car isn’t worth repairing after an accident, it might write it off and offer you a sum of money. If you don’t think the sum offered accurately reflects the value of your car, you can use a car insurance write-off calculator to work out whether you’d be better off scrapping your car instead.
