We all know that applying for an annual car insurance policy often results in a number of questions (including why has my car insurance gone up for no reason?). This sometimes lengthy process is designed to assess the likelihood of you making a claim – and how expensive that claim might be.
While many of these factors are not requested when you apply for temporary car insurance, we still want to help you get the best value when it comes to purchasing your annual insurance. Here’s our top 10 list of things that insurers use to calculate the cost of an annual policy.
What is a car insurance premium?
Based on a number of factors including your age, driving history and where you live, your car insurance premium is what you pay an insurer for your car insurance policy. You must have car insurance to drive your vehicle on UK roads, with third party cover the legal minimum.
What factors affect car insurance rates?
1. Your Age
Younger drivers between the ages of 17-25 generally face the highest premiums. This is because, statistically, they are more likely to be involved in an accident and the scale of these claims tend to be of a higher magnitude.
In contrast, older drivers are more likely to be safer drivers with years and experience behind the wheel. After the age of 25, insurance premiums begin to fall and stabilise, before climbing again above the age of 70. At that stage driver reaction time is considered to be a higher risk.
2. Your gender and marital status
Quotes are often higher for men compared to women, despite EU legislation introduced in 2012 designed to end price discrimination between the genders. Insurers would argue that the difference simply reflects the fact that women make fewer claims.
Likewise, insurers often quote cheaper premiums to married people who, according to statistics, have fewer accidents than singletons.
3. Your Occupation
Insurers have a wealth of data on the rate and scale of claims for people working in different job professions. Unsurprisingly, careers that involve a high exposure to driving often command bigger-hitting premiums – for example journalists, delivery drivers and car salespeople.
In contrast, certain medical professions, police officers, paramedics and – ironically – insurance underwriters, are perceived as safer driving groups that command a favourable premium.
While there are often set boxes used to describe a profession, some jobs can command a cheaper premium depending on how you label your job. A journalist could also be a writer and a mechanic could be a vehicle technician.
If your role can be described in different ways, look for the one most closely related to your actual day to day role. Alternatively, you could contact the provider to provide additional clarification and support.
4. Your Vehicle Risk Rating
For many years, one way to get a lower insurance premium has been to purchase a vehicle in a low insurance group. The insurance groups have recently been replaced by Vehicle Risk Ratings rated from 1 to 100, with higher numbers indicating higher risk (and therefore pricier premiums).
This Thatcham Research rating system applies to any car manufactured after 1 August 2024 and assesses the following factors:
- Performance – Vehicle characteristics such as speed, acceleration and the impact of modern powertrains.
- Damageability – How design, materials, and construction influence repair costs and damage severity.
- Repairability – The ease and cost of repairs.
- Safety – Active and passive safety systems, including crash avoidance features.
- Security – Physical and digital security measures, leveraging Thatcham Research’s New Vehicle Security Assessment expertise.
5. Your driving history
If you have any points on your licence or have made any claims in the past, insurers will see you as an increased risk, more likely to make a claim in the future. On the flip-side: if you haven’t made a claim for a year or more, you are likely to have some kind of no-claims bonus (NCB) qualifying you for a discount on a renewal or future policy.
You can usually build up to 5-years NCB, with many insurers allowing you to protect your NCB discount by paying a little extra on your premium. NCB protection effectively enables you to make a claim without it affecting your discount.
6. Where you live
Your postcode can have a significant impact on the cost of your premium. High crime neighbourhoods or built-up areas where the risk of accidents and vehicle theft is greater will inevitably result in you paying more for your premium.
7. Where you keep your vehicle
Your premium is likely to be higher if you park your car on the street, where it is more vulnerable to damage and theft. You can reduce your premium costs by parking on a driveway or, better still, securing your vehicle in a locked garage or monitored car park overnight. You can also potentially lower your premium by fitting thief deterrents like alarms and immobilisers.
8. How many miles you drive
Insurers will often bump up your premium if you have a high annual mileage or use your car for business and commuting purposes. In simple terms, you’re more likely to have an accident if you do lots of driving when roads are busier and more dangerous. Premiums can be reduced by limiting your annual mileage to an agreed maximum level and restricting your car usage to non-business and commuting purposes.
9. The level of cover you buy
Insurers will usually offer three levels of coverage:
- Comprehensive
- Third Party
- Third Party, Fire and Theft
While you would think that third party coverage is likely to be cheapest, this may not always be the case, so make sure you shop around and ask for quotes on all options before you buy.
10. Your excess
Your car insurance excess (sometimes referred to as a deductible) is the set amount of money you agree to contribute towards any claim. The insurer will only settle the remainder of the claim once you’ve paid your excess.
You can often reduce the cost of your premium If you agree to a larger excess. This is, in effect, agreeing to shoulder a larger proportion of the costs in any claim. If you increase your excess to reduce your annual cost, you must make sure you are able to pay this amount in the event of a claim.
Other ways you can reduce your car insurance
Annual insurance can be a significant part of the cost for owning and running a vehicle. Before you buy, it is worth reflecting on how often and under what circumstances you’ll be driving.
In some cases it may be cheaper to add yourself as a named driver on someone else’s policy. You should only do this if you are a secondary driver and are NOT the principle or main driver of the car. If you misrepresent yourself as the secondary driver as a way to reduce the cost of your insurance (this illegal process is called fronting), it can result in the cancellation of your policy and the refusal by the insurer to pay out damages in the event of an accident.
Higher-risk drivers may also be able to reduce their costs by adding an experienced driver with several years no claims on to their policy. When all drivers are considered in totality, the additional driver effectively dilutes the overall risk exposure.
The temporary insurance alternative – Tempcover It!
If you only drive occasionally, it can be cheaper to purchase temporary car insurance. This will enable you to drive a vehicle already insured in someone else’s name. This could work for young drivers who find it more cost-effective to insure themselves on a parent’s or friend’s car on an hourly or daily basis, or someone who only really drives during certain periods of the year.
Taking out temporary car insurance is an incredibly quick process. With Tempcover, you can get a quote in under 2 minutes. There’s no need to provide a long list of details such as expected mileage. Instead, all you need to do is:
- Visit www.tempcover.com
- Fill in your details
- Get your quote
- Purchase your policy
With temporary car insurance, you could share the drive on a long road trip, quickly switching drivers when one fancies a break or is simply feeling too tired. You could also lend a car to a friend in need, perhaps insuring them for a few days so they can get where they need to go.
For further uses and benefits of temporary car insurance, you can read our following blog posts: driving someone else’s car, 10 reasons to choose temporary car insurance and your insurance options when buying a new car.
