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If you own a car, buying car insurance is a necessary evil. Not only is it a legal requirement for driving on UK roads, but it’ll protect you financially if your car is stolen or involved in an accident. Some of the things that affect the cost of car insurance are outside your control – such as your age. But there are other factors you can control, and plenty of ways to keep costs to a minimum.
The average cost for comprehensive car insurance across the UK is £416 per year, based on Association of British Insurers (ABI) data for the first quarter of 2022. That’s a 5% drop on the previous quarter. But it’s still a substantial expense, especially at a time when the overall cost of living is on the rise. And for drivers under 25, the cost can leap considerably higher.
The ABI calculates the average cost of car insurance by using data from several different insurers. It looks at the price consumers pay for their cover, rather than the price they are quoted.
However, the price you pay as an individual depends on a whole host of factors and may be much higher or lower than average. These include your age, your driving experience, the car you drive, how much repair costs are likely to be and whether you have previously claimed on your insurance.
Car insurers take a huge number of factors into account when setting car insurance premiums. The car itself will obviously play a big part in this, but some other crucial criteria are your age, where you live and your driving history. Evidence shows that each of these has a substantial impact on the risk of you being involved in an incident. Insurers are all about managing risk, so the higher the risk you pose, the more your insurance will cost.
Young drivers, under the age of 25, are statistically more likely to be involved in an accident. Data published by the ABI shows they are more likely to make a claim and for that claim to be costly, so they tend to pay more.
After the age of 25, claims frequency and the average size of claims both gradually decrease until drivers are in their early 60s, and premiums fall in line with this. However, it’s not all smooth sailing for older drivers. From the age of around 70, the claims trend reverses, with the average claim size for over-80s similar to that for 18–20-year-olds. So you may see your premiums rise in later life.
Most people would assume that where they live would have some bearing on the cost of car insurance. So you might think (and in many cases you’d be right) that those living and driving in big, urban areas will be at higher risk, and pay more, than those that live in the countryside.
But the link isn’t always as obvious as you might think, and there might be nuances at play. One area of a big city might be more prone to car thefts than another, for example. Meanwhile areas that tend to experience very bad weather conditions – such as flooding – might be considered higher risk whether they’re urban or rural.
The specific location where your car is parked will also make a difference. Parking your car in a locked garage or on a secure driveway is likely to make for lower premiums than parking it on a busy roadside.
This goes beyond just your years of driving experience. Insurers take 2 key factors into account. First, your history of making claims. The more car insurance claims you’ve made in the past, the higher your premiums will generally be. It’s not just about compensating for the cost of claims you’ve already made. If you’ve already made a claim (or claims), insurers will perceive you as more likely to make further claims, and increase your risk level.
Driving convictions will also tell against you. If you’ve been caught speeding or driving under the influence, you need to tell your insurer. If you don’t, you risk invalidating your insurance. The more driving offences you’ve committed, the more you can expect to pay for your car insurance.
Your individual circumstances, your car and the policy you choose will all affect the price you pay for car insurance. We’ve summarised most of the key factors below. If you want to double down on your expertise, check out our in-depth guide on how car insurance premiums are calculated.
To help determine how much you’ll pay for car insurance, insurers will want to know some details about the driver of the vehicle:
How can I save on my policy? You have little control over some of the above factors, but there are still some steps you can take to lower costs.
Insurers will also take the type of car you drive into account when calculating your premiums. All of the factors below will feed into a vehicle’s car insurance group. This can in turn have a big influence on the price you pay. Some factors affect the chance of an incident in the first place, whereas others affect the size of the claim if you need to make one.
Every driver in the UK is required by law to have at least third party car insurance. It’s the most basic type of cover, but this doesn’t necessarily mean it’s always the cheapest. In some cases, you might be able to get comprehensive cover for the same price, or even less, than third party cover. Be sure to compare comprehensive car insurance with third party car insurance to get the best deal.
There are other aspects of cover that can also affect the price you pay, including:
How can I save money? Find a car insurance policy that matches your needs, including affordability.
Almost certainly. Even relatively minor accidents can affect your future car insurance premiums. How eye-watering the increase is will depend on a number of factors, including whether you’ve been involved in accidents previously.
Most people would probably expect premiums to rise if you make a car insurance claim following an accident. It may come as more of a surprise that premiums can rise even if you don’t claim. That’s because car insurers will think you’re at a higher risk of future accidents. Don’t be tempted not to tell your insurer about a prang, though. It could invalidate your insurance, and this could have much bigger consequences.
This can be one of the most frustrating realities to get to grips with. Why on earth does your car insurance rise when you haven’t claimed, had an accident or made any changes?
As a general rule, safe driving and stability are rewarded. And, at least in the first few years of buying car insurance, accumulating claim-free years will boost your no-claims bonus – a discount on your headline premiums. So, all else being equal, you would reasonably expect premiums to go down over time.
But most insurers cap their no-claims discount at a certain level. There will come a point when the level of discount will stop growing. And, even if this isn’t the case, there may be factors that drive your premium up more than the discount brings it down. One of these is age. As we highlighted above, drivers in their 70s and 80s become (on average) more likely to make a claim. So, sadly, you may find that your premiums start to rise after you turn 70.
Plus, sometimes, external factors play a part. For example, if the cost of replacement car parts increases, or the government puts up the cost of insurance premium tax (IPT), car insurers are likely to pass these costs on to their customers.
One piece of good news. It used to be the case that loyalty did the opposite of paying, and insurers often charged loyal customers renewing their policy much more than they’d charge a new customer with exactly the same risk profile. Since January 2022, they’re not allowed to do this, after the Financial Conduct Authority banned the so-called “loyalty penalty“.
You can save money by taking control of the factors affecting your car insurance prices wherever possible. With the cost of car insurance varying so widely, there are opportunities to save a lot of money.
Definitely annually. If you can, paying for a full year of cover upfront is almost always the cheapest option.
If you pay in monthly instalments, you’re effectively “borrowing” the full cost of cover from the insurer. It’ll charge you interest for this, and you’ll end up paying more in the long run. In one scenario, we found that paying monthly rather than annually added about 10% to insurance costs.
Not necessarily.
Third party car insurance only covers you for any damage you cause to other people’s cars or property, while comprehensive cover also covers damage to your own car from accidents, fire, theft, vandalism and more, plus theft of your car. So, logically, third party cover should be cheaper.
Bu this isn’t always the case. Some people may find that comprehensive cover is just as cheap, if not cheaper, than buying third party cover for the same car. This slightly counterintuitive state of affairs came about in response to the fact that, historically, high-risk customers have been more likely to take out lower-protection (and traditionally cheaper) policies. So some insurers raised the premium costs for drivers taking out third party or third party, fire and theft cover.
In short: never go straight for third party cover without checking all your options.
There are a number of reasons why car insurance is so expensive in the UK, but it’s primarily due to the high cost of claims and the fact that many claims are fraudulent. ABI figures show that a total of 55,000 fraudulent car insurance claims worth £602 million were uncovered by insurers in 2020.
Referral fees can also push up prices for motorists. This is where personal details are sold by car insurance firms to personal injury lawyers after an accident, leading to a rise in compensation claims.
Additionally, there are more than 1 million uninsured motorists on the UK’s roads. This increases the cost for all insured drivers as the insurance industry has to cover the cost of injury and damage to others following an accident.
Car insurance is likely to set you back a good few hundred quid a year on average, with higher-risk drivers paying much more. While you can’t legally drive on UK roads without car insurance, and should never be tempted to fib to your insurer to keep costs down, there are a number of legitimate ways to cut costs. One of the main ones is to always shop around at renewal to see whether you can save by switching to a different car insurance provider. Though keep in mind that cheapest isn’t necessarily best – always look to see which insurer can give you the best value for your specific needs.
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