Churchill magazine

Car insurance premiums explained

Updated on: 30 April 2024

Couple looking at bills on a laptop computer

Ever wondered what goes into calculating your car insurance premium? 

The price you're quoted is a mix of personal details and broader external factors. We're going to break it down a bit further so you know exactly what's what . 

Personal factors influencing your car insurance costs 

1. Age and driving experience

Younger drivers often face higher premiums due to a perceived higher risk, whereas premiums can increase for drivers over 70 due to the heightened risk of accidents. The duration you've held your license also plays a role, with more experienced drivers generally receiving better rates. 

2. Your vehicle

The make and model of your car can significantly affect your premium. High-powered or luxury vehicles are more expensive to insure due to higher repair/replacement costs and an increased risk of theft. 

3. Location

Living in densely populated or high-crime areas can lead to higher insurance costs, as these factors increase the risk of accidents and theft. 

4. Annual mileage

The more you drive, the greater your risk of being involved in an accident, which in turn influences your insurance premium. 

5. Additional drivers

The details of other drivers on your policy, including their age, driving history, and personal information, can impact your premium. 

6. Driving record and claims history

Recent offences or previous claims can lead to higher premiums, while a history free of claims can earn you a No Claim Discount (NCD), reducing your costs. 

7. Excess

Opting for a higher voluntary excess can lower your premium, as you're taking on more of the risk yourself. 

External factors affecting your car insurance costs

1. Inflation

Rising costs for parts and labour due to inflation can increase insurance costs, as repairs become more expensive. 

2. Cost of claims

An uptick in driving and accidents can lead to more claims, increasing insurance costs for everyone. 

3. Insurance fraud

Fraudulent claims push up costs for insurers, which can result in higher premiums for policyholders. 

4. Insurance Premium Tax (IPT)

Changes in IPT rates will directly affect your insurance costs, as this tax is included in your premium. 

5. Operating costs

The expenses involved in running the insurance company, from staffing through to creating brilliant customer experiences, also play a role in determining your premium. 

When it's time to renew your policy, various factors may cause your rate to adjust, but rest assured, your renewal quote will not exceed the rate for a new customer with identical coverage and details.

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