How Much Does Car Insurance Cost?

The latest figures from the Association of British Insurers shows the average cost of fully comprehensive car insurance to be £484 per year (Q4 2019). However, the car you drive, the type of cover you choose, your personal details and any no claims bonuses you may have will impact how much you pay for your premiums.

Find out what impacts car insurance cost and what you could pay in this guide.

Six things which affect the cost of car insurance

car insurance policy 2

Insurers come up with quotes for car insurance based on the information you give them, which in turn allows them to develop a risk profile. This tells them how likely you are to make a claim and in turn determines the cost of any cover.

Ultimately, the higher risk you pose, the more expensive your insurance will be.

1. Age

Age is an important factor when it comes to determining risk as there is a correlation between age and driving accidents. Statistics suggest that the younger you are, the more likely you are to be involved in a car accident, which explains why car insurance for new drivers is so expensive.

For example, studies suggest that driver’s aged between 16-19 are a third more likely to die in a crash than drivers aged between 40-49 and that one in four 18-24 year olds crash within two years of learning to drive.

2. Where you live

Another important risk determining factor is the area where you live. Insurers will take note of your postcode and look at population density, traffic density and crime rate in the area to see how likely it is you’ll be involved in an accident or a victim or car theft/vandalism. Insurers also use previous claim statistics and check against the postcode’s known risk rating which are ranked from low to high, to quantify your ‘postcode risk’.

The question regarding where/how the car is stored overnight is also important here. If you’re in a high crime rate area but can secure your vehicle then you’re likely to receive lower premiums than someone in the same area that doesn’t.

3. Your work

Where you work can also influence your insurance costs because insurers will look at how often you are likely to use your car and where you’ll use it. This again tells an insurer whether you’re more/less of a risk.

4. What car you drive

If you’re looking to insure a powerful vehicle model that happens to have less safety features, then it’s likely to be more expensive to insure than a smaller, slower alternative which places more emphasis on passenger protection.

Insurance groups are a great resource here and you can look out for these when searching for a new car as they will indicate how much you’re likely to pay for insurance. This is because each vehicle make and model is allocated to an insurance group between 1-50 with 1 being cheapest to insure and 50 being the most expensive.

5. Any no claims discount

A no claims discount (NCD), also known as a no claims bonus (NCB), is a discount applied to insurance premiums for drivers that have proven they can drive safely for a substantial period of time. 

Savings from a NCD can be significant and research published by motoring research suggests that a five year’s NCD could net you savings of up to 24%. See how much your safe driving could save you on average with the table below.

Let’s use an example to put these savings into perspective and show how impactful a no claims discount can be. 

If you were quoted car insurance at £500 before discounts, the same quote with five year’s NCD would be around £380 compared to a quote of around £440 for a year’s NCD.

6. Type of cover

avg insurance cost
Credit: MoneySuperMarket

While it might be strange to think that third-party only insurance is the most expensive, given that it provides the least coverage, it’s actually due to the historic nature of the insurance type.

Third-party only used to be the cheapest type of cover and a favourite with young drivers. However, a large number of claims lead to a steady increase in prices.

Remember: Make sure you shop around to see if you can save money by taking out more cover.

How to calculate your insurance premiums

The best way to determine what you’re going to pay is by running a quote online using one of the many comparison websites available. While not all insurers will be listed on comparison websites, they can give you a rough starting figure to work with.

Before you start your search, make sure you have the following information to hand as you’ll need it in order to receive your quotes: 

  • Vehicle registration (you can still get a price without this, but there’s a chance that it may not be as accurate).
  • Driving licence number.
  • Make and model of the car.
  • Expect annual mileage.
  • The vehicle’s current mileage.
  • When you first got the vehicle.
  • Current address.

What if I don’t have the car yet?

If you’re leasing a car, while there are exceptions, you’ll also be responsible for insuring it and your vehicle will need to be insured prior to delivery. To do this, you’ll need to get the registration number from the leasing company. You’ll also need to state that the leasing company/finance provider is the registered keeper and owner of the vehicle, as this will enable you to get an accurate quote for your vehicle before it comes.

Remember: Insurance for a lease car must be fully comprehensive, as required by the finance provider who is the registered owner and keeper of the vehicle.

Total Care Packages

Total care leasing is a premium package offered by some providers that bundles up additional extras such as insurance into one monthly price. Providers that offer such a package usually differ in what they offer, but expect to find some if not all of the following:

  • Insurance
  • Maintenance
  • Breakdown assistance
  • Road tax
  • Third party cover and own damage protection
  • Total loss shortfall protection

Here are five examples of total care quotes compared to standard quotes from our own market research on a 36 month contract term, 6 month initial rental and 10,000 annual mileage:

5 ways to keep your car insurance costs down

Certain factors that contribute to expensive insurance premiums are unfortunately unavoidable – for example, being a young/new driver – but there are ways you can actively reduce the cost of your insurance premiums.

Here’s five ways that you can reduce your car insurance.

1. Build up a good no claims discount

car insurance cover

As we’ve mentioned previously in this article, a good no claims discount can lead to massive savings, with a five year’s discount resulting in savings of 24% on average. As such, it’s vital that you start working on building your NCD as soon as possible. This is especially important for new and young drivers who are likely to see larger savings due to their higher quotes.  

However, it’s also important to make sure you keep your no claims discount going. Having to claim on your insurance will reduce your no claims bonus by two years on average, but forgetting to renew your insurance will completely wipe it out. Failure to get cover within two years of when you stopped being insured will mean you have to start building your NCD from the ground up – a costly mistake.

2. Don’t auto-renew, shop around

Nowadays most insurers will automatically renew your policy once it’s expired and will send you a letter/email a few weeks before the renewal date, to confirm what the new price of the premium will be.

At this point we recommend running a few quotes with other insurers and comparing this to what you are going to be charged if you were to stay put. A lot of the time you can get a better deal elsewhere or even drive the cost of your current insurer down.

Remember: An insurer won’t want to lose your business, especially if you’ve been a loyal customer who has been with them for several years.

3. Add a named driver

A named driver is someone who is also insured to drive a vehicle which you are registered as the main driver on.

Adding a low-risk named driver to your insurance could lead to savings if you’re personally seen as high risk, for example new and young drivers. This is because insurers will assume that you’re spending less time driving than if you were the main driver on your own policy. 

Remember: Named drivers won’t usually be able to build up a no claims discount and only the main driver tends to be able to do this.

4. Put down a higher voluntary excess

Voluntary excess refers to the amount you’re willing to contribute whenever you make a claim. Having a higher voluntary excess can reduce your insurance premiums because it shows you’re serious and won’t make unnecessary or frequent claims as it will cost you personally. 

Before you increase your excess, you should consider what you can and can’t afford. Don’t just put down a higher excess to lower premiums if you can’t afford it because if you do need to claim your insurer either won’t pay out or what’s paid might not even cover the costs for repairs.

5. Fit your car with a good alarm/immobiliser

This refers back to how vehicle security can help lower your insurance premiums, especially if you’re in a high crime rate area. By fitting your car with a good alarm/immobiliser you’re proving to your insurer that your vehicle is secured and as such less likely to get stolen.

If you still have questions about car insurance, head over to our handy guides page to find out all you need to know. Otherwise why not include insurance costs in a lease with Total Car packages? Browse our latest car lease deals now.

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