How car insurance quotes are calculated
Find out how insurance companies use risk factors such as your address, occupation and driving history to calculate your car insurance quotes.
Did you know.
- Your insurer will class certain occupations as a higher risk
Insurers will ask you a series of questions when calculating your car insurance quote.
This helps them to determine the risk they’re potentially taking on and how likely you are to make a claim on your policy.
Generally, insurers evaluate (rate on) the same factors when calculating premiums, but – as no two risks are identical – prices can vary from one company to another. The main areas they look at are:
Car insurance group
The ratings are based on the risk of the vehicle. Factors used to calculate group ratings are:
- Vehicle’s worth
- Damage and parts costs: The likely extent of damage to each car model and the cost of the parts needed to repair it
- Repair times: Longer repair times mean higher costs and the greater likelihood of a higher group rating
- New car values: Prices of new cars are considered as they’re often a good guide to the cost of replacement and repair
- Body shells: Availability of body shells (the basic frame of the car) is taken into account in group ratings because they’re essential for certain accidental damage repairs
- Performance: Acceleration and top speed are important factors
- Car security: Security features can help to reduce the insurance claims costs
Insurers may reassign a vehicle to a different group based on trends they identify from their own records.
For example, if a certain car type was involved in many accidents, its group rating may increase.
The premium charged for the vehicle would then also increase in order to cover the extra claim costs.
All insurers require your claims history, usually for the last three-to-five years.
The more claims made by an individual and the more money that has been paid out to cover costs, the greater risk they pose to the insurer for future claims. This means they could be charged more for their policy.
Insurers will look at all the drivers covered on a policy when deciding how much to charge for insurance.
Adding on a driver who is considered a safe risk – for example, a driver with no claims or convictions who has been driving for over 20 years – may only incur an administration charge.
But adding a driver who’s under 25 and has a speeding conviction may substantially add to the cost of your insurance as a greater risk needs to be considered.
Using your car to drive between family and friends or go shopping will result in a lower premium than using your vehicle for both social and business reasons
Insurance companies will rate on driving convictions. If you have a conviction on your licence then insurers consider you to be a greater risk on the road than a driver with no convictions.
Your insurer will ask for details of convictions in the last three-to-five years. The more serious the conviction, the more your insurer will add to your premium.
Sometimes an insurer may add special terms to a policy or only offer lesser levels of cover for more serious convictions.
Insurers cannot charge extra for medical conditions if you hold a licence without any restrictions.
If you do hold a restricted licence your insurer may need to take this into account when reviewing the risk. They may also take adaptations to vehicles into account if it means it will cost more to replace the adaptation (and so increase the risk).
You need to inform the Driver and Vehicle Licensing Agency (DVLA) of everything that may have an effect on your ability to drive.
Read our guide to medical problems and driving. or try the DVLA website † that has a lot of information about driving and medical conditions which should help clarify any questions you have.
The more time you spend on the road the more likely you are to have, or to cause, an incident, meaning that your premium will increase the more you drive.
As with all the risk information you supply, you should be as accurate as possible when telling your insurer what your annual mileage is.
Your insurer will class certain occupations as a higher risk when, for example, someone carries goods in their vehicle.
An insurer may consider that a builder carrying over £1,000 worth of equipment in his or her vehicle is at a higher risk of having their vehicle stolen, damaged and/or not recovered than an average driver.
Other occupations which carry a higher risk with insurers include professional sportsmen and sportswomen, entertainers, chefs, and those linked with licensed premises.
Insurers will look at the security systems on your car when deciding what to charge for a policy.
If your car has an alarm and/or immobiliser fitted it’s less likely that it’ll be stolen – you can therefore expect to pay less for your motor insurance policy than someone who has no security device on their car. Read more in our guide to car security and your insurance premiums .
The value of your vehicle will play a major factor in determining the level of your insurance premium. More expensive cars will generally cost more to insure than lower-priced vehicles.
Did you know.
- Non-disclosure of information or mistakes made when applying for insurance could stay on your record for life
In most cases, older vehicles can often receive discounted rates as the vehicle value is usually lower.
However, vehicles recognised as classic cars could be of a high value. It can be difficult to obtain parts for some classic or non-classic older cars, and this can also push up the premium.
What you use your car for will have a substantial impact on your insurance premium.
If you only use it for driving between family and friends or to go shopping, this would be the minimum risk to an insurer.
However, if you use your vehicle for both social and business use you’ll face a higher rate from your insurer as you’re considered at greater risk of making a claim because of the extra mileage you drive or the goods you may carry.
The different categories of vehicle use are:
- Social, domestic and pleasure: Provides cover for day-to-day driving, such as visiting family and friends or going shopping, but NOT for driving to work
- Social, domestic, pleasure and commuting: Cover for everything in the social, domestic and pleasure category, plus driving to and from one fixed place of work. It also includes travelling to, and parking at, a railway station
- Business use: Can use car in connection with your job, such as driving to more than one place of work
- Commercial travelling: Can use car for things like door-to-door sales
Remember to check your policy documentation which will state what you can use your vehicle for.
Where you live is another important factor when it comes to assessing your premium.
In a city you can expect increased levels of traffic as opposed to the countryside, so there may be a greater chance that your car will be involved in an accident, be vandalised, or be stolen.
Certain areas have a higher level of car crime and insurance premiums tend to reflect that risk.
Leaving your car out on the road overnight rather than in a locked garage is also likely to affect your premium – see our guide on overnight parking .
Remember that you must tell your insurance company if you move or if you spend more time at one address than another.
For example, a student may be at home at the weekends but spend the majority of their time at college. An insurer may not pay out on a claim if such things have not been disclosed.