Insurance Premiums Explained

How premiums are calculated

Factors taken into account in costing your insurance include:

•Who will drive
•Type of car
•Where it is kept
•The purpose of the vehicle
•The type of cover required

Drivers
The policy may only cover driving by yourself or specified people, or it may allow driving by any qualified person with your permission, possibly over a certain age limit. Your insurers will want to know about anyone who is likely to drive - particularly their age, experience, driving record and occupation.

Age - Statistically, drivers under the age of 25 are at greater risk of being in an accident than those over age 25. Drivers between the ages of 50 and 65 generally have the safest records.
Experience - You will need, at the least, three years driving experience to be quoted a lower rate by insurance companies.
Gender - Women are statistically safer drivers, but that trend is changing as more female drivers get on the road.
Marital Status - A married person will pay less than a single person with an identical driving record as they are considered to be more settled and responsible.
Occupation - Insurers have statistically found a correlation between your occupation and risk. For instance, a delivery person is presents a higher risk than an accountant as they spend more time in thier vehicle.
Driving Violations - Having an accident or moving violations on your record put you at a higher risk for accidents and will likely mean a higher premium. Some insurance companies will penalize you for your record for as many as five years from when the incident occurred. However, keep in mind, as your record improves, your premium will improve.

Your Car
Cars are catagorised by thier different insurance groups. These groups number 1-20, with 1 being the least expensive. So it is important to be aware that if you have car in an insurance group of 5, you will be paying a higher premium than someone with a car of in an insurance group 3. Cars such as small family cars with moderate repair costs are cheaper to insure than large, powerful cars with more expensive repair costs. Older cars also attract discounts from comprehensive insurance premiums. Car security is another factor that will effect the price of your insurance policy, and insurers may award cheaper premiums if your car is fitted with an engine immobiliser or an alarm.

Mileage
A low mileage presents the insurance company with a client who has less oppurtuntiy to be involved in an accident, so this can contribute to a lower premium.

Location
District Insurance claims are more frequent in urban areas so motorists in cities usually pay more for their insurance than those who live in the country. Keeping your car in a garage can also reduce the price of your premium considerably.The place where the car is kept is a rating factor, so tell your insurers if the car is not kept at your home address.

Previous Claims
No Claims Discount Policyholders with a claim free record normally qualify for a premium discount. Scales vary but usually range from 30% for one claim free year up to 60% or more after four or five years. "Protected Discount" policies are often available for motorists with maximum discount. For an extra premium, a number of claims are allowed without affecting the discount.

The Group Rating System

Insurance companies put car models into twenty groups. This means that each model of car can be accurately banded with cars of similar characteristics. There can be a significant spread of groups within a particular model range.

Click here to find out what insurance rating a car is

How the System Works

Nearly three quarters of all money paid out in motor insurance claims goes on repairing cars. The cost of spare parts and the times taken by repairers are therefore major factors in pricing motor insurance. The factors used to calculate group ratings are:

Damage and Parts Costs

The likely extent of damage to each car model and the cost of the parts involved in its repair. The lower these costs, the more likelihood there is of a lower group rating.

Repair Times

Longer repair times mean higher costs and the greater likelihood of a higher group rating. Different paint finishes on modern cars are an important factor. These, too, are taken into account.

New Car Values

The prices of new cars identify the higher specification models within a model range.

Body Shells

The availability of body shells (the basic frame of the car) is taken into account in group ratings because they are essential for certain accidental damage repairs.

Performance

Acceleration and top speed are important factors. Insurance companies know very well, from their claims statistics, that high performance cars often result in more frequent insurance claims.

Car Security

Security features fitted as standard equipment by motor manufacturers can help to reduce insurance claims costs. Such features include high security door locks, alarm/immobilisation systems, glass etching, coded audio equipment, locking devices for alloy wheels and visible VIN numbers.

Recommended Group Ratings

The group ratings determined by the Association of British Insurers are recommendations only. Individual insurance companies, depending on their own experience, may vary from these recommendations.

Buying a Car

Motorists planning to buy a new car should check, in motoring magazines, the insurance group rating of the exact model they have in mind. The higher the group number the more will be the premium.


Different Insurance Policies

There are three main types of car insurance that you can choose from

Third Party Only
Covers you for claims made by other people for bodily injury or damage to their property. Most policies cover the policyholder in person while driving a car which belongs to someone else. However, cover will be limited to third party only, even if you have a comprehensive policy. Accidental damage to the borrowed car will not be covered by your insurance.

Third Party, Fire and Theft
As above, plus your car is covered if stolen or damaged by fire.

Comprehensive
This gives you both of the above and also covers accidental damage to your car.

Which you choose is up to you. Fully comprehensive insurance is the most comprehensive insurance option but the premium you pay for this will be higher.

If you are at fault in an accident and you have Third Party insurance you could be left without compensation, but the difference in premiums over several years could be more than the cost of a repair and could therefore be cheaper in the long run.

Whatever policy you choose to take out, ensure that you inform your insurers about changes to your personal circumstances, as a failure to do so could invalidate your policy.

Using your insurance

If your car is stolen

Tell the police immediately then tell your insurer and ask for a claim form.

Be prepared to wait a while in case your car is recovered. A great many cars taken without the owner’s consent are soon found abandoned.

If property is stolen from your car tell the police immediately and then tell your insurer.

Most comprehensive policies protect you against loss of or damage to rugs, clothing and personal belongings which are in your car. Policies set a limit on the value of such property. Check your own policy for details.

Making a claim after an accident

After the accident get as much on the spot information as possible. Ensure you get hold of the names and addresses of independent witnesses before they leave the scene. If you have a video or camera in the car, get pictures before vehicles and property are moved. Also, make a sketch plan of the accident while the details are fresh in your mind. Ask the other drivers involved for their names and addresses and make a note of their car registration numbers together with the make and model. Ask for the name of their insurers and also, if possible, their policy number or certificate number. If anyone is injured, produce your certificate of insurance. If you cannot do this at the scene you must produce it at a police station within 24 hours. There may be injury to people or animals or damage to vehicles or property. If so, you are required to give your name and address, the name and address of the owner of the car you are driving and its registration number to anyone with reasonable grounds for wanting them. Tell your insurers about any statement made at the scene by any of the parties. Do not discuss whose fault it was. If you do, you could create problems for you and your insurers in the handling of your claim. You must tell your insurers as soon as possible - even if you don’t intend to make a claim. This is a condition of your policy. Ask your insurers for an accident report form. When completing the form include as much information as you can.

Car repairs resulting from an accident

If your car has been damaged as a result of an accident you will need to send it to a garage for repair. Depending on the company and the car insurance policy cover you took out, your insurer will send your car to a repairer approved by the insurer. Large insurance companies tend to build large networks of approved car repairers across the country so that their customers do not have to travel far to get their vehicle fixed.

An approved repairer will provide the quickest way to get your car back on the road after an accident. Insurance companies also negotiate contracts with approved car repairers to ensure their customers receive the highest quality of service at low prices.

If you don’t want to use an insurer approved car repairer, you can use your own garage. If you decide to use your own garage be prepared to provide repair estimates. Insurance companies will inspect the car themselves before the repairs are authorised or not, dependent on the price. If you use your own garage you should expect the repair to take longer than if you were to use an approved car repairer, who can normally start the work straight away.

If you decide to use a garage not approved by your insurer it is vital that you contact your insurance company for advice. If you are supplied with a replacement hire car you may not automatically be covered under your policy.


For more information on car insurance click here