How do insurers determine what your car insurance premium will be?
During this time of year, many people are shopping around for new car insurance quotes to try and save on their monthly premiums and although multiple insurers are dominating our screens with ad campaigns claiming massive savings at the touch of a button, many people will find themselves disappointed when they see that the new quote is much higher than their current premium.
If you or anyone you know is currently searching for better insurance premiums, there’s a good chance you have asked this question: “How do they determine that amount?” Cornerstone Insurance Brokers has the answer for you and despite the world of short-term insurance being difficult to understand sometimes, the way in which insurers calculate your premium is relatively simple.
It’s very important to remember that all these factors play a role collectively, meaning you can’t look at one determining factor in isolation without taking the others into account. There are also other factors that may play a role that aren’t mentioned here. That said, here are some of the top factors that determine your car insurance premium.
The younger you are, the more you pay. This might seem ageist and unfair, especially to young drivers, but rest assured that this is not based on bias, but on facts and statistics. Years of research has shown that due to a lack of experience on the road, young drivers are more likely to have accidents and therefore more claims. The inflated premium that a twenty-something will pay, merely covers the risk that’s associated with that driver.
It’s not all bad though. As you age, you may see a steady decline in your monthly car insurance premium. This is because the opposite is statistically true – the more experience you have on the road, the less likely you’ll be to have an accident and a claim. That’s why people over the age of 25 might have cheaper insurance premiums, depending on when they received their licenses.
Your licence issue date
Another vital determining factor that influences your insurance premium is how long you have had your license aka your licence first issue date. You can’t expect a low premium because you are 45, but you have only been driving for 2 years, right?
This also speaks to your driving experience – people who have been licenced longer are statistically less likely to have accidents and claims. Therefore, the longer you have your license, the lower your premium might be.
The type and age of your vehicle
This can be slightly confusing and sometimes contradictory, but it can still be explained relatively easily.
- Vehicle age
Normally, an older vehicle will mean a lower premium due to the value of the vehicle being lower compared to a new one. However, there are some exceptions like antique and collector’s vehicles. These types of vehicles are bound to inflate your premium because of the high value they carry and the difficulty of finding replacement parts for them.
- Type of vehicle
Over and above the difference in the value of different vehicles, some vehicles are more at risk of theft and hijacking while certain brands are easier to repair than others. All of these factors relating to the type, make and model of your vehicle will influence your car insurance premium. Remember to chat to your insurance broker before deciding on a new vehicle to ensure that you don’t buy a vehicle that will inflate your insurance premium too much.
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An exception to the general rule will be exotic cars like modified racing vehicles. Many insurers don’t insure exotic cars, mostly because of the risk associated with modified vehicles (increased speed etc). However, some insurers might take them on at a higher monthly premium and excess.
Your claims history
Last on our list and self-explanatory. If you submitted many claims in the past, you are statistically more likely to do the same in the future. This increases your risk to the insurer and that will increase your premium. That is why it’s vital to avoid claiming for smaller costs like window chips and tiny scratches, because even the smallest claim can impact your risk profile negatively.
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