Impact of address on car insurance premium

Car insurance premiums are a calculation of risk involving a number of factors. These can range from the obvious such as your age, car make and model, and your driving history to the slightly more obtuse such as your line of work and where you live. Essentially anything that affects the odds of you making a claim will impact your premium. Find out more about how your address may affect your car insurance premium.

Why does my address affect my car insurance?

Though not obvious at first, where you live has a major impact on your car insurance rates.

Urban areas are more densely populated than rural ones, with busier roads, more car accidents overall and a generally higher likelihood of making claims of any kind. This increases premiums in cities.

However, living in rural areas means you typically need to drive longer distances on every commute, the roads can be in worse condition and you may be more likely to lose a car to bushfires or other hazards than someone living in the city.

In addition, statistically, 90% of all car accidents occur within miles of the driver’s home and insurance providers know this.

How does my address affect my car insurance?

Your address is used to apply very specific loadings based on location, and risk factors vary between neighbourhoods the same way they can vary between states. This is based on the odds of making a claim, and might be affected by countless factors such as how narrow or wide your road is, whether it turns onto an unusually dangerous intersection and many others.

• Where you park. You can pay less for car insurance if you park in an enclosed garage or carport overnight, instead of on the street. Therefore, addresses without a garage have higher car insurance prices.
• Weather. Rain, snow, fog and other bad weather can cause car accidents, so areas with frequent poor weather can have higher prices.
• Crime. If your policy includes cover for theft, the crime rate in your neighbourhood will likely impact your premiums.
• Population density. The more crowded your area, and the more cars on the road, the higher the prices.
• Road maintenance. Poor road conditions are responsible for many accidents, so having better maintained roads in your area can lower premiums.

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Steps to reduce costs

The golden rule of car insurance prices is that your odds of making a claim determine your premiums. Fortunately, you don’t need to move house to reduce location-dependent factors. Instead, try finding a policy that matches your situation and needs.

Choosing the level of cover

There are three different types of car insurance to choose from. The more at-risk your area is for certain hazards, the more important it is to get covered against it, but it will typically cost more.

• Comprehensive. The highest level of cover available. The only policy that typically includes comprehensive cover for weather damage, which means it may be disproportionately more expensive, but also important, in locations that are prone to extreme weather. Parking in a garage or under cover can help lower the cost of comprehensive cover.
• Third party with fire and theft. A liability policy with cover for fire and theft. Unlike third party only policies, locations at higher risk of car theft will attract higher prices. Car security systems, such as immobilisers, alarms or VIN etching, can help you keep costs down.
• Third party only. The most affordable type of policy. This policy generally comes with little or no cover for damage to your own car. If you live in a high-risk, high-premium location, then this policy type will be disproportionately more expensive, but may be missing the type of cover you need.

There are many other factors which affect car insurance prices besides location. It can be worth looking over them for other ways to cut your car insurance premiums. Once you’ve done that, getting low prices is largely about comparing policies side by side.

Frequently asked questions

• How is car insurance calculated?

  The amount you pay for your car insurance policy is a reflection of how likely an insurer thinks you are to make a claim, and how expensive that claim is likely to be.

  Some of the main factors that will help determine how much you pay include:

  • Your age
  • Your occupation
  • The car you drive
  • Value
  • Power
  • Desirability
  • Security
  • How you use your car
  • Your driving history and no-claims bonus
  • Your excess
  • The type of cover you buy

• How can I reduce my car insurance premiums if I live in a high-risk area?

  If you live in a high-risk area, there are a few things you can do to reduce your premium. Things like making sure your vehicle is parked off the road, installing a car alarm and immobiliser. By reducing the risk to your vehicle, you should see that premiums you’re quoted start to fall.

Written by

Esther Wolffowitz

Publisher

Esther Wolffowitz was a publisher at finder.com specialising in insurance. Esther holds an MSc in Media and Communication Governance from the London School of Economics and Political Science (LSE). See full bio