Why Your Car Insurance Premium Isn’t Based on the Car Alone

When people ask why their motor insurance premium is so high, the first thing they often look at is the vehicle itself.

That makes sense. The make, model, value and age of the car all matter. But they are only part of the picture.

Motor insurance pricing is based on the overall risk presented to the insurer. That means two people driving the same vehicle can receive very different premiums because their circumstances are different.

Here are some of the main factors that can influence what you pay.

1. The vehicle itself

The type of car you drive plays an important role in pricing. Insurers may consider the retail or market value of the vehicle, the cost and availability of replacement parts, typical repair costs, theft and hijacking risk, safety and security features, engine size and performance, and the availability of tracking technology.

A more expensive vehicle is not always automatically the highest risk. A lower-value vehicle with a high theft frequency may sometimes attract a higher rate than expected.

2. Where the vehicle is kept

Your location can have a major effect on motor insurance. Insurers may look at the area where the vehicle is normally parked overnight, as well as where it is used during the day.

Factors may include theft levels, hijacking frequency, accident statistics and whether the vehicle is parked in a locked garage, behind a security gate or on the street. This is why changing your residential address can be important information to give your insurer.

3. Who drives the car

The regular driver is another major rating factor. Insurers may consider the driver’s age, how long they have held a driving licence, driving and claims history, whether the vehicle has multiple regular drivers, and previous insurance history.

It is important that the correct regular driver is disclosed when the policy is taken out.

4. How the vehicle is used

A vehicle used for occasional private trips presents a different risk from one that spends several hours on the road every day. Your insurer may want to know whether the vehicle is used for private use, travelling to and from work, business use, deliveries, commercial purposes, or regular long-distance travel.

The more time a vehicle spends on the road, the greater its exposure to accidents and other risks may become.

5. Your claims history

Past claims can influence how an insurer views future risk. One claim does not necessarily mean your premium will increase dramatically, but the insurer may consider the frequency, type and value of previous claims.

Several motor claims over a relatively short period can affect pricing, excesses or underwriting conditions.

6. Your excess can affect your premium

The excess is the amount you may need to contribute when making a claim. In some cases, choosing a higher voluntary excess can reduce the monthly premium. But this should be considered carefully.

A lower premium is not necessarily helpful if the excess becomes unaffordable when you need to claim. A better question is: What excess could I realistically afford if I had an accident tomorrow?

7. Security requirements matter

Depending on the vehicle and risk profile, an insurer may require additional security measures. These could include an approved tracking device or other anti-theft measures.

If your policy includes a security condition, it is important to understand exactly what is required and to keep the system active where applicable. A failure to comply with policy conditions may affect a claim.

8. Modifications should be disclosed

If you modify your vehicle, tell your insurer. This can include changes such as upgraded wheels, suspension, performance modifications, specialised equipment or expensive aftermarket accessories.

Modifications may change the value or risk profile of the vehicle, and some equipment may need to be specifically included in the policy.

9. The cheapest premium is not always the best option

Motor insurance should not be compared on price alone. Before choosing a policy, also look at the basic excess, additional excesses, theft and hijacking conditions, tracking requirements, car hire, roadside assistance, credit shortfall cover, windscreen cover, territorial limits, whether accessories are included, and how the vehicle is valued.

A slightly higher monthly premium may provide better value if the policy is more suitable for your needs.

The most important thing is accurate information

Motor insurance works best when the insurer has a clear and accurate picture of the risk. If your circumstances change, update your broker or insurer.

A new address, different regular driver, change in vehicle use or modifications to the vehicle may all be relevant.

At AIR Insure, we believe you should understand your insurance before you need to use it.

Invest. Inform. Insure.

This article provides general information and does not constitute advice tailored to your circumstances. Cover varies between insurers and policies and is subject to the policy schedule, wording, limits, excesses, exclusions and conditions. Contact Phoenix Risk Solutions for advice based on your specific needs