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Car insurance costs explained

  • 6, Aug 2020
  • Read time: 8 mins

This guide is created to help you understand what your costs might be so you can get car insurance that suits your needs. Even the smallest detail can have a big impact on how much you pay. The more you understand how car insurance is calculated, the better you are at finding the right deal.

Couple looking at laptop.
For example, in the UK car insurance experienced a significant drop during 2019 when the average (comprehensive) policy fell to £466. This, however, doesn’t mean your car insurance premium should be the same, or close to this figure.

Why insurance costs vary by region

Where you live is important to how your car insurance is calculated. Urban postcodes, for example, will present different levels of risk from their rural counterparts. The premium you pay will be affected by:

  • Crime levels
  • Population density
  • Traffic density
  • Local claims for personal injury
  • Local accident rates
  • Fraudulent accident claims

Urban regions such as London and Greater Manchester may pose a greater level of risk than other areas. However, that’s not the full picture. Other factors come into play.

For instance, you may live in a quiet, rural setting, but this does not automatically guarantee a lower premium. According to a 2018 government report, of the 1,784 road deaths in 2018, the majority (58%) occurred on rural roads (1,030). A total of 646 deaths occurred on urban roads and 107 on motorways. As well as other factors, this could have an impact on how much car insurance you pay.

How car insurance costs are affected by age

Age is an important factor when establishing average costs of car insurance. For example, in 2018 drivers over the age of 70 were involved in significantly fewer accidents than drivers aged 17-24, and they managed this while driving greater distances than their younger counterparts.

Such studies show that age does make a difference to how your insurance is calculated. We know that:

  • Young drivers are more likely to be involved in accidents
  • Young driver’s accident claims are more expensive than other age categories
  • Older drivers aged 61-71 make fewer accident claims
  • Drivers aged 46-66, their claims are statistically less costly resulting in lower average insurance premiums

If you’re aged 17-24 check out SMART WHEELS young driver insurance and earn cash rewards on a pre-paid card for driving safely.

Does gender make a difference to car insurance costs?

In 2018 there were over 33.3 million licence holders in the UK. Of the population, 81% of males held a licence compared to 70% of females. Males travelled greater distances; 63% compared to 37% females. Does gender make a difference to how insurance is calculated?

In 2012 the European Court of Justice ruled that insurers could no longer cite gender as a basis to calculate car premiums. 

However, since that ruling it has been established that men still pay more for their car insurance. Although insurers do not use gender-based valuations, they still gather detailed data from multiple sources. Once all the details are analysed male drivers still present more of a risk than female drivers. This may be attributed to:

  • Their choice of car
  • Their jobs and associated risks
  • Usage (average mileage, driving during unsociable hours etc.)

What affects your car insurance price?

Your driving behaviour

A person with 5 years no claim bonus will present less of a risk than a driver with multiple accident claims plus three points on their licence. Always drive safely and within the legal limits.

Personal injury claims such as whiplash

The Association of British Insurers (ABI) states over 1,500 whiplash claims are made in the UK as a result of road accidents every day. This results in £2 billion costs to the insurance industry, adding £90 to the average annual motor premium.

Accidents involving uninsured motorists

The MIB (Motor Insurers Bureau) estimates that 130 people are killed each year and 26,000 suffer personal injuries resulting from hit-and-run or uninsured drivers.

Uninsured drivers present a risk to everyone’s car insurance premium. If you’re involved in an accident with an uninsured driver the resulting claim is paid out from a central fund that insurers contribute to. More claims involving uninsured drivers means more money is paid out from the fund. As a result, insurers raise premiums to meet the deficit.

To reduce your car insurance costs, remember:

  • If you’re a young driver aged 17-24 try black box insurance to keep average costs low
  • Setting a higher excess fee could help to lower your premium
  • Consider reducing your average annual mileage to lower your level of risk
  • Consider multi-car insurance discount if you have more than one car in your household. Offer ends 23 November 2021
  • Check with your insurer before modifying your car
  • Read our guide on how to reduce your car insurance costs

Make sure you're getting the right deal on your car insurance.

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