What factors determine your car insurance premium? | RateCity … – RateCity

Vidhu Bajaj
18 Aug, 2022
Fact Checked
Car insurance rates are heavily personalised. Though it may seem surprising, the same insurer may charge you and your neighbour differently for the same level of cover on the same car model. That's because the level of risk the insurer takes in providing the same level of cover to both of you is likely to be different. 
For instance, younger drivers are generally considered at a higher risk of being involved in an accident. So, if you or your neighbour are under 25, you can expect to be charged extra. Besides your age, even your gender, the colour of your car and the distance you travel each day could affect your insurance premium. Here's how some of these factors could impact your insurance costs:
Statistics show that young male drivers under the age of 25 are more likely to be involved in road accidents. As a result, male drivers aged 18-25 usually pay among the highest rates for car insurance. 
However, once you cross 25, insurers generally start seeing you as less of an accident risk, and your insurance premiums should start trending downwards. However, this may not be true for everyone, as age is only one factor impacting your insurance premium. 
Younger males are also likely to pay more for their car insurance than younger females. Statistically, men are at greater risk of a crash than women due to increased risk-taking behaviour and poor risk perception in some cases. Therefore, some insurers increase the premium rates for males, especially those in the younger age groups, because they tend to cost them more at the time of claim. 
The colour of your car could affect the amount of money you pay to insure it. A report from the Monash University Accident Research Centre in 2007 pointed out that the colour of a car could be associated with a greater risk of a crash. According to the report, cars painted in colours on the lower end of the visibility index, such as black, blue, grey, green, or red, have higher chances of meeting with an accident compared to white vehicles. 
Following the results of the study, some insurers may charge you less for insuring a white car than one painted in  a darker shade. Colours on the higher end of the visibility spectrum, like orange or yellow, may also be relatively cheaper to insure. On the other hand, if your car is painted black (or any other dark colour), you are likely to pay more for your insurance cover.
How colour impacts your insurance premium also depends on the insurer you choose. Some insurers do not ask for the colour of your car when providing a quote, as safety features on newer models are believed to neutralise the impact of a car's colour on its crash risk.
Your driving history and previous car insurance claims affect the premium you pay on your car insurance policy. Generally, insurers increase your car premium by a small percentage when you make a claim against your insurance policy above a specific amount for an accident caused by you.
But what happens to your premium if you had to make an insurance claim for an accident that wasn't your fault? This could be the case if your car was damaged by a severe weather event, broken into, or when you are unable to take down the details of the at-fault driver because they fled the accident scene.
In situations like these, you'll need to make a claim on your insurance policy even when you are not at fault. Unfortunately, such no fault car insurance claims could also affect your premium at times. For instance, if your car was damaged due to hail or being broken into, the insurer may decide your parking spot isn't safe, or worse, the area where you live has become dangerous, and decide to increase your insurance premium. 
A rarely used car is less likely to be in an incident than a car used to commute frequently. Therefore, the distance you drive is an important auto insurance rating factor that insurers consider when deciding your premium. 
Naturally, the more kilometres you clock on your car in a specified period, the higher the insurance premium you will pay. However, if you haven’t been travelling much lately, reducing the number of kilometres on your insurance policy could potentially shave off some money from your premium. 
If you rarely get behind the wheel, you may find it useful to consider a pay-as-you-go car insurance policy that lets you pay for the kilometres you think you'll be driving in a year.
Living in an area with a higher crime rate could affect your insurance premiums. Different postcodes in the country are associated with varying levels of crime. Consequently, there's a higher risk in some areas of your car being damaged or stolen, and many insurance companies consider this factor when deciding your insurance premium.
In addition to where you live, your insurance premium could also be affected by where you park your car. A car parked in a garage or a secure parking bay, is believed to carry a lower risk than a car parked on the street. So parking your vehicle inside a locked garage or under an off-street carport might help you reduce your insurance premium.
Understanding the factors that impact your car insurance premium can help you reduce your insurance costs to an extent. For instance, carpooling to the office with your co-workers could reduce the number of kilometres you drive, helping you save on fuel costs and a reduced insurance premium. However, there are also a few things you may not be able to change, like your age or even the place where you live. But that doesn't mean you can’t clock some savings on your car insurance premium by being savvy.
One of the simplest ways to reduce your insurance premium is by comparing your car insurance options online to see if you could get a better deal. Comparing deals from different insurers will help you determine what others charge for the features and options included in your policy. You can also compare additional features and discounts offered by different providers to choose a policy that is not only cheaper but also suits you well.
Compare car insurance policies
Can I get a refund on car insurance?
Have you decided to cancel your car insurance policy? Maybe you’ve sold your car, or you found a better rate elsewhere.  Perhaps you’re just not driving it anymore. So what happens to the unused amount of your car insurance? Can you get a refund on unused car insurance in such a scenario?
It often depends on who cancelled the policy: you or your insurance provider. If you initiated the process of cancellation, then you may be able to get most, if not all, of your unused amount. There might be some cancellation fees involved.
However, if the policy has been cancelled by your provider, because you defaulted on a payment, then you will not receive any refunds. Keep in mind, sale of your vehicle, or traffic violations such as receiving too many speeding tickets, or being charged with reckless driving, are not reasons to withhold refunds.
If you pay your insurance monthly, your future payments will simply stop. However, many insurance policies are paid upfront for the year, as some companies offer discounts. If this is the case, get in touch with your insurer about getting a refund for the unused amount.
Does the colour of your car affect your insurance rate?
You may be surprised to learn that you may want to consider choosing the colour of your car based on your insurance premium, and not your favourite colour. Research from Monash University back in 2007 has shown that the colour of the car could affect the likelihood of a crash and hence some colours could attract higher car insurance premiums than others.
Statistically, silver and grey cars have demonstrated a higher crash risk as compared to say, white cars. This could be because these colours have lower visibility on roads as compared to other colours. The colour orange is deemed a safer bet than white, as are shades of cream, yellow and mauve, although the difference in their premium pricing is not as significant.
Additionally, some colours and paints, especially metallic or pearl shades, can be expensive and cost more to repair or replace. These colours could also affect the value of your car and may raise its cost to a certain degree.
Besides the likelihood of being involved in an accident and the cost of repainting, certain colours also pose a greater chance of being stolen. On average, a green car costs less to insure than a black one since data has shown that black cars are more likely to be stolen than green ones.
Does car insurance cover contents?
Thousands of vehicles are stolen each year, but insurance can protect you from financial loss.
A common question you may have is what does my car insurance cover? This depends on the type of insurance and there are four basic types of car insurance, and each offers different cover.
Compulsory third-party (CTP) insurance indemnifies you against liabilities arising due to personal injuries to another party. A third-party fire and theft insurance policy covers loss to your car or third-party property in an accident. It also covers expenses if your vehicle is damaged in a fire or stolen. Third-party property insurance covers any liability resulting from damage to third-party property but any damage to your property is not covered under this policy.  Comprehensive policy covers most costs arising in case of an accident to either your car or third-party property.
Does car insurance cover contents lost in case of a theft? Generally, any valuables stolen from the vehicle, such as your phone, are not covered under car insurance. However, some insurers offer vehicle contents insurance that does cover the loss of valuables from your car.
Consider reading your policy’s product disclosure statement (PDS) to find out if it covers contents, or contact your insurer directly.
Remember, there are several ways in which you can prevent theft of both your car and contents. Being a little more cautious can make a huge difference.
Can you insure your car for 6 months?
Most Australian insurers won’t offer you a 6-month car insurance policy, so you may need to buy a policy that covers your car for damages and cancel it after six months. You will need to purchase comprehensive car insurance to protect your car from accidental damage, theft, vandalism, or natural disasters.. 
Consider checking whether your 6-month comprehensive car insurance will cost more if you pay monthly or six-monthly premiums instead of a one-time annual premium. Another question to ask the insurer is whether you’ll need to pay administration or cancellation fees when you cancel the policy.
Alternatively, you can look for a suitable ‘pay as you drive’ car insurance policy, which usually offers you the coverage of a comprehensive car insurance policy but only requires you to pay for the distance driven. Such a policy may not be the ideal 6-month car insurance plan as it is based on how much you drive rather than for how long. If you need to drive a lot, you may end up paying more than you’d pay for regular car insurance. 
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Fact Checked
This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.
Vidhu Bajaj
Personal Finance Writer
Vidhu is a Personal Finance Writer at RateCity. She has been writing about finance topics from car loans and home loans to superannuation and cryptocurrencies for over five years. Before moving into finance, Vidhu went to law school where she studied human rights law. She has a Bachelor of Law degree and has previously worked in asset finance for Clifford Chance for more than four years. During her time at Clifford Chance, she worked in the India, London and Hong Kong offices on everything from aviation to vessel finance. In her spare time you’ll find her reading the Australian Financial Review or spending time with her dog Coco.