Your insurance policy costs more than the value of your car; your premium increases after you move 5 doors down the road; a friend with the same car pays less than you do; your 1.4l VW Polo has a higher premium than your 2 litre Audi. Crazy? Not when you understand how the premiums are calculated.
It's a Gamble
Basically, insurance is a game of risk. Insurers are gambling on whether or not you'll make a claim; they're trying to work out what you might cost them, using a bewildering array of statistics. Every policyholder - claim or no claim - adds to the statistical information held by the insurers, which in turn affects the rating of your policy.
At the quote stage your information is compared with these statistics. A potentially high risk factor equals a higher cost for you.
Postcode Lottery
Statistics based on your address can be as specific as the second half of the postcode, so your premium can rise if you move just down the road. The new postcode may present a higher risk due to accident or theft claims made there in the past.
Your occupation also makes a difference, as does your age and driving experience - all factors effectively beyond your control. However, your choice of vehicle (the exact make, model and engine size) is a key factor and it is always wise to get speculative insurance quotes before deciding to buy.
Bear in mind that although friends may insure a similar car cheaply, your details - and those of your named drivers - will make all the difference to the price. Small hatchbacks, for example, are a particular favourite amongst young drivers and insurers may 'load' the premiums, however little that driver may use the car.
Types of Claim
Typically, Third Party Fire & Theft policies are cheaper than Fully Comprehensive, for obvious reasons. Fully Comprehensive opens the door to claims for damage to your own vehicle and even loss of its contents, along with a few token extras. You may expect the legal minimum level of cover (Third Party Only)to be much cheaper again, but this is not so.
Third Party claims are potentially astronomical: imagine damaging a Ferrari, paying compensation for the death of a third party, or even providing lifetime care to someone injured in an accident (potentially limitless costs). For this reason your premium may be higher than the value of your car. Don't expect a reduction in cover to reduce your premium by much, if at all.
What Can You Do?
Remember, it's all statistics, so don't take it personally. This may sound glib but it takes a lot of the frustration out of insurance as there's very little you can do.
However, the way companies view the statistics varies hugely between companies. You may be one insurer's dream customer and another's nightmare, so it's always worth shopping around at renewal. The same applies if your premium increases mid-term. Weigh up the savings made by moving elsewhere against any cancellation fees on your current policy - it can be worth it.
