Ever wonder how insurance companies calculate your car insurance premium, and why the rates vary from one insurance company to the next? Insurance companies usually gather specific information to determine how much of a risk you pose and how likely you are to file a claim. Different insurance companies weigh the rating factors and make their calculations separately, and that’s why you may find other insurance companies offering you different rates.  

The insurance company collects data on risk factors as you fill in the quote form, which usually affects what the insurance company will quote. Next, behind the scenes, the company’s algorithms work to make an educated guess on your risk level and calculate your rate. The safer you seem, the cheaper the quote will be, and the riskier you appear, the more you’ll pay for your car insurance.

Some risk factors are obvious, and others aren’t so obvious, but insurance companies have their way of weighing things to back up the prices. Here are factors that may affect the cost of your car insurance.

  • Your years of experience will affect the price of your car insurance.

How long you’ve had your driving license affects the cost of car insurance. This is because less experienced drivers are more likely to be involved in accidents and make a claim. However, there’s a way some people use to reduce the cost of their car insurance if they are young – find another driver to name in the insurance. 

A word of caution, though – naming somebody else as your main driver and you as the named driver, while you’ll be the one with the car, is mostly illegal and will probably result in your insurance company rejecting any claims you file. The term given for this is fronting and is considered an offense of insurance fraud; the results of which could prove serious.

You can acquire more experience, and prove it to the insurance company by taking a Pass Plus Course or an Advanced Driving qualification from the Institute of Advanced Motorists.

  • Your engine size

The larger the size of your car’s engine, the higher the cost of insurance. Your engine’s size matters because it determines how powerful your car is, which puts you in a higher insurance group. The higher insurance group means your insurance is more expensive. Cars with small engines can be powerful, too, especially if it’s a turbocharged engine. Turbocharged engines also attract expensive insurance cover. Some insurance companies wouldn’t cover you if you installed the turbocharger yourself.

The reason for charging so much money to cover a powerful engine is that insurance companies say that a more powerful engine is more likely to get into an expensive accident because of the speed. It’s recommended to hold out getting the car of your dreams, especially if you’re a young driver, because a young driver with a powerful engine will attract an even higher insurance premium. An experienced driver with a powerful engine will probably not attract as much. 

  • Where you live

If you live in an area with a high rate of car-related crimes or insurance claims, you’ll be quoted a higher insurance price. Living in a built-up area will increase your chances of accidents through the mere probability of more vehicles on the road. Areas with more crime rates add to the cost of premium because vandalism and theft may be more common.

In the UK, the weather might also be an added risk to your rates. If you live on the coast or near a river with a problem with flooding, your insurance company may consider the cost of potential water damage.

Where you park your car also affects your insurance cost. If you’re a student and live in hostels where there’s a higher crime rate, since you can’t move, you may also consider parking your car in an overnight garage or safely at home, where it would be safer and less risky. You can also install alarms or motion sensors to discourage thieves and vandals.

None of the above methods would affect the price of the premium, but it could prevent you from needing to make claims in the future by reducing the risk of your car being stolen or damaged.

  • How prone to theft your car is

This variable is assessed on how prone your car is to be stolen. It depends on your security and how likely your kind of car is to be stolen or broken into. When you modify your car, it will also attract costly car insurance cover. If you have ideas to pimp your car, and raise or lower it, or even add bigger wheels or other trendy things, you may want to reconsider it. But then, if you can afford the high premium rates, well and good. 

Insurance companies ask for more premium to cover modified cars, because they know the car works best when left as the manufacturer made it. However, you can consult the insurance companies and ask which types of modifications they recommend, and how much it will cost your car insurance. 

  • Profession

Insurance companies usually categorize people by profession. Occupations associated with high stress levels are considered high risk. For example, delivery guys or salespeople who spend a lot of time on the road are more likely to be involved in accidents. The insurance company may ask for a higher premium to cover the additional risk.

You may be tempted to lie about your profession, but it’s not advisable. When found out, inaccurate information will make your insurance void, and when you make a claim, it may not be payable.

You can’t control how old you are, the experience you have on the road, or the kind of profession you’re in, but you can control some other factors. Buy a car with insurance that won’t break the bank, keep your car safe, and keep a clean driving record. Just because your rating factors aren’t perfect doesn’t mean you can’t get affordable rates. Shop around at https://www.moneyexpert.com/car-insurance/ and find an insurer with competitive prices for your particular needs. 

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Author: Susan Paige