Motorists in the UK face a number of ongoing costs. Not only do we have to contend with the price of the vehicle up-front, but we also need to think about the price of fuel, taxation, maintenance, and consumable products like tyres, screenwash, and engine oil.
Of course, one of the most pressing and intimidating costs is that of insurance. If you’re concerned about the ongoing cost of motoring, then it’s worth thinking about how insurance works, and the difference it can make to your bills.
What is a car insurance premium?
The car insurance premium is the cost you pay in order to keep the policy active. You can think of it as a kind of bet. When you pay the premium, and nothing goes wrong with your vehicle, you don’t get anything. But when something does go wrong, the insurer will cover the costs of putting it right.
From the point of view of the insurer, which is placing thousands upon thousands of ‘bets’ every day, the risk is being managed and effectively diluted. The cost of the bets that lose is offset by the premiums paid by those that don’t.
From the point of view of the motorist, the same thing is true: by paying for a policy every year, you avoid the major costs that could stem from a one-off fault. Insurance works to eliminate risk on both sides, boosts confidence in the industry, and ultimately keeps cars on the road.
In the UK, car insurance is a legal requirement. Moreover, there are several rules that prevent it from being treated like any other kind of ‘bet’. For example, motorists agree not to deliberately damage their own vehicles in order to secure a payout. You’ll find many of these rules printed in your policy documents.
Main factors that affect it
The cost of your car insurance depends on the risk perceived by the insurer. It will reflect their view of the likely cost, and frequency, of any payouts.
Different insurers will arrive at different conclusions, here. They’ll therefore charge different prices. However, there are a few factors that are common to all of them.
The mileage you’re putting in, for example, will matter. The further you drive, the greater the likelihood that you’ll be involved in an accident. The neighborhood you live in will matter, too, as will your age, your driving history, and your occupation.
The make and model of your car is of particular interest to insurers. Sports cars, for example, are often more expensive to repair, and more likely to be involved in severe collisions.
Saving on car insurance premiums
There are a number of ways to reduce the cost of your premiums. Shopping around is perhaps the most effective of these. Use price comparison sites, and directly approach insurers that aren’t on them. When you’re comparing policies, make sure that you read the specifics of each one, and ensure that you’re comparing like for like. Car insurance policies vary, often considerably.
You might also install a black box, which will provide information to your insurer about exactly how you’re driving. This is a way of demonstrating that you’re low-risk.
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