There are many different factors included in the calculation of a person’s car insurance policy, applied differently for different locations and activities. Here, we will discuss these factors and potential ways that these factors can be avoided/reduced.


Firstly, however, it is important to define a few key terms in the car insurance game:

  • Premium – the fee paid to take out the policy which, if paid extra upon, can protect your no-claims discount and help to minimise increases to your insurance costs if you happen to make a claim
  • Excess – the contribution you are required to pay towards a claim you make on your insurance policy. Insurers may have many types of excesses that can apply in different situations or concurrently
  • No-claims bonus – if you take out an insurance policy but end up not making any claims during the length of the policy, then the insurer will provide a discount, which typically works at the following rates:
  1. 30% off after 1 year
  2. 40% off after 2 years
  3. 50% off after 3 years
  4. 60% off after 4 years, and
  5. 65% or more after 5 years

Driving History

If a driver has a track record of safe driving, they pose less of a risk than a driver with a long history of accidents and claims, but because of this, insurers always look at your history before setting you a policy. They consider your claims history in case you have made a claim yourself because drivers who have made a claim in the past are often more likely to make another one in the future.

As part of this, however, insurers will consider any no-claims discount you’ve accrued through years of incident-free motoring.

It is possible to protect your no-claims discount by paying extra on your premium. That helps to minimise increases to your insurance costs if you happen to make a claim. But, the surest way to keep your premium as low as possible is consistently to drive safely.

Surrounding Environment

Insurance companies will almost certainly look at local statistics, including crime and traffic incidents, to determine whether or not the area you live in is dangerous, and if so, how likely you yourself are to take out a claim. If you reside in an area in which accidents are a frequent occurrence, then the costs of the insurance policy are likely to be much higher. Also, if you live in a region where weather is notoriously icier or wetter – and, as a result, the risk of having an accident is increased – then the chances are that your premium will also rise to compensate for the increase in the cost of car repairs.


Of course, if you are one to spend more time housebound and your car remains more unused than most other drivers, you are more likely to receive a lower-costing policy on account of having a lower chance of accidents. There are several other lifestyle factors that can come into consideration, such as:

  • Where you live, such as a residential area surrounded by busy city-centre roads or a quiet suburban area with minimal traffic. Statistics from the said area will be evaluated by the insurance company before setting fees
  • Whether or not you commute to work – and distance travelled, as a long journey could leave the door open wider for accidental damage

General Claims Culture

Insurance providers must also consider the general insurance market whilst setting their rates, general and individual – if the rate of all claims across the UK rose dramatically at a certain point in time, then you can expect your costs to rise also! Providers must keep up with their market’s behaviour and condition, and act accordingly.

Car Type/Model

The price and age of your vehicle will have involvement in the insurance company’s decisions, as newer ones will cost more to repair. Antique cars that still hold high value could also be very costly to repair in places (bearing in mind, of course, that the machine must stay in tip-top shape to keep its value!). You must also let the insurance provider know about any unnecessary car modifications, as this too will increase repair costs.

In addition to the few ways mentioned in which you can reduce your car insurance costs, the best place to start would be to compare all policies offered, perhaps on a comparison site, to ensure you get the best deal to start with and are not overcharged – especially if you are confident of never needing a claim!