What are car insurance premiums and excess and how are they calculated?

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Written by Michael Foote , founder of Quote Goat, with over 13 years experience working in the finance, insurance and currency sectors.

Our car insurance payments are separated into two categories; you have the amount you pay monthly or annually, known as your premium, and you also have an excess, which is the amount you have to pay in the event of a claim.

The excess is further split into two categories: mandatory and voluntary. Mandatory is of course a compulsory payment set by your insurer, whilst the voluntary is set by you.

You pay your premium to your insurer in return for coverage. Should you be involved in an accident or need to make a claim for any other reason they will pay for any coverage detailed in your policy. You can set your voluntary amount yourself but always bear in mind that the lower you chose to set your voluntary excess, the higher your premiums will cost.

How are my car insurance premiums worked out?

Insurance companies gather all relevant information about you, your vehicle and your driving history in order to calculate an accurate insurance premium. They take into account your profession, your yearly mileage, your address, your voluntary excess, the make and model of the car you drive, how secure it is kept overnight. They even take into account information on other named drivers and any driving offences you may have received in the past.

All of this information gives providers an indicator into how much of a risk you are for them to insure. Those who are deemed more of a risk will have a higher premium than those identified as low risk.

There are ways to lower your car insurance premiums. One of the easiest ways is to compare car insurance quotes carefully by using a trusted comparison site like Quote Goat. Simply enter your details and let our experienced team of analysts compare all the deals from UK car insurance companies that you qualify for.

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