Why is car insurance so expensive?
With premiums soaring to record highs, it’s little wonder so many of us feel our car insurance is too expensive. This article will help you discover how premiums are calculated and how you can get a cheaper deal
Key Takeaways
Your age, the type of car you drive, and where you live affects your premium
Cars in a higher insurance group are likely to be more expensive to insure
Opting for telematics insurance can lower your premiums
Comparing quotes with MoneySuperMarket can save you up to 47.78%[1] on your car insurance
Read on to find out exactly why car insurance is so expensive, and how you could save money when looking for a quote.
What makes car insurance expensive?
Car insurance can be a major expense, and for some, it can reach into the thousands to pay for annual cover. If this is the case, it’s likely because insurers consider you a high-risk driver.
Your insurance provider determines the level of risk you pose by considering certain factors, like your age, job title, postcode, and the car you drive. But other factors have an effect on prices too; things like fraudulent claims and uninsured drivers hike prices up for everyone.
However, the average motor insurance premium fell by 2% in April to June compared to the first quarter of 2024, according to the latest data from the Association of British Insurers (ABI).
Personal factors affecting car insurance prices
When calculating your premium, insurers will consider all of your personal details and assess how likely it is that you will make a claim. If they think your personal circumstances mean that you are more likely to claim, then they will deem you higher risk and quote you a higher price.
Some of the personal factors that will affect your premium include:
Your age
The value and age of your car
Your job
Where you live (factors such as the crime rate in your area, the amount of accidents and your proximity to the city will all affect your premiums)
Your driving record - points on your licence and past claims
How long you’ve been driving
Annual mileage
Where your car is kept overnight
Why is car insurance more expensive at renewal
Although less common than it once was, you may still find that you are quoted a higher price than the previous year when you come to renew your insurance.
New rules introduced by the regulator have stamped out the worst behaviour where insurers would charge loyal customers more over time, sometimes called the loyalty penalty.
But there are other reasons that your price might increase, including inflation or a change in your personal circumstances.
Why is car insurance so expensive for young drivers?
Young drivers in particular may be thinking: why is car expensive so expensive? Age is one of the most important factors when it comes to calculating premiums, because younger people are statistically more likely to make an insurance claim.
In other words, young drivers carry higher claim risks, so they can often pay more than double the average car insurance premium.
Sadly there is no quick fix to this, but there are still some things you can do to bring down the price. Some policies are specifically designed for younger drivers and offer cheaper quotes if drivers agree to certain conditions, such as the monitoring of their driving by a ‘black box’.
20-29 age group
Policy Type | Average premiums |
|---|---|
Comprehensive | £1073.02[2] |
Third Party Only | £1400.27[3] |
Third Party, Fire & Theft | £1483.91[4] |
60+ age group
Policy Type | Average premiums |
|---|---|
Comprehensive | £376.38[2] |
Third Party Only | £492.39[3] |
Third Party, Fire & Theft | £386.48[4] |
How does occupation affect car insurance?
Your occupation can also push up the cost of car insurance as some jobs are considered riskier than others. A tree surgeon, for example, will likely pay more for car insurance than an accountant.
This won’t always be the case, however, as a range of other factors are also taken into account. If you drive your car as part of your job, you may need a specialist business car policy. Otherwise, the insurer could refuse to pay any claims you make.
It is possible to tweak your job title a little in a way that may bring down your premiums. We found that a “journalist” can be charged up to 4% more than “editorial staff”, for example. However, make sure you are honest and do not mislead the insurer about what you do, as this could cause your insurance to be deemed invalid or even be considered insurance fraud.
Why is car insurance so expensive in my local area
When you’re shopping around for car insurance quotes, the price may seem extreme. Location is one of the most important factors insurers consider when determining car insurance prices, with drivers in some regions paying more than twice the cost of others.
Underwriters will study statistics in your local area to work out how much of a risk your postcode is. They look at things like:
Traffic density
Population density
Crime rates
Number of claims in your area (including fraudulent claims)
Number of accidents in your area
High-risk road systems
While you are unlikely to move house in search of better car insurance premiums, make sure to update your insurer if you do move as it could lead to a better deal.
How to save money on your car insurance?
Don’t auto-renew
Most car insurance companies raise your premium when you renew automatically. You can find cheaper deals by shopping around. MoneySuperMarket does this work for you: comparing quotes with us can save you up to 47.78%[1] on your car insurance.
Buy policies 20-27 days early
Insurers generally offer you their best deals a few weeks before your policy starts. The cheapest time is usually 20 days before - comparing quotes on this day can save you up to £231[5]
Increase your excess
Insurers are likely to reduce the cost of cover if you’re willing to increase your voluntary excess. Be careful not to increase your excess so much that you can't afford it.
Take out telematics insurance
Insurers can monitor your driving habits with telematics hardware, so responsible drivers earn lower premiums.
Drive fewer miles
The more time you spend on the road, the higher the chances are of you being involved in a road accident. That's why someone who drives 10,000 miles a year pays on average 3%[6] more for insurance than someone who drives 2,000 miles.
Add a named driver
Adding an experienced driver to your policy tells insurers you won’t be solely responsible for the car, so they’ll reduce the price.
Buy a sensible car
Smaller, less powerful cars are cheaper, safer to drive, and less attractive to thieves, so the overall risk for the insurer is lower.
Pay annually
Paying an annual lump sum might mean a greater initial expense, but insurers charge interest when you spread the cost over monthly payments. Annual payments are up to 31%[6] lower than the total cost of monthly instalments, saving you up to £267[6]
Keep your car secure
Factory-installed locks and immobilisers can reduce the risk of your car being stolen or vandalised, as well as keeping it stored in a locked garage.
No-claims discount
Most insurers will offer a no-claims discount to drivers that don’t claim on their car insurance.
Although you can’t control all the factors considered when insurers decide car insurance premiums, there are still steps you can take to help cut the cost. Check out our guide on how to find cheap car insurance for more information.
Compare car insurance with MoneySuperMarket
The easiest way to find cheaper car insurance is to compare quotes with MoneySuperMarket. All you need to do is tell us a little about yourself and your driving history, and we will show you our selection of the best deals.
You’ll be able to compare policies by the overall monthly and annual cost, the cover you’ll get, and the excess you’ll need to pay to make a claim. Once you’ve found the deal you want, just click through to the provider’s website to finalise your purchase.
As with any kind of insurance, the cheapest option isn’t always the best. We recommend you try to balance the cover you’ll get with the overall cost of your policy, so you don’t end up over- or under-insuring yourself
Why has car insurance gone up so much this year?
Car insurance premiums have increased significantly in 2024 due to several factors, including rising repair bills driven by a shortage of parts and higher garage running costs, as well as economic and market factors like inflation. Additionally, increased weather-related damage claims, pothole damage, and higher rates of theft, especially for high-end vehicles, have contributed to the rise. Insurers also need to maintain sufficient reserves for claims while balancing profitability and affordable coverage for consumers.
