Direct Line magazine

Your car insurance price explained

Updated on: 30 June 2023

a man and a woman in the kitchen looking at bills on a laptop

Have you ever wondered how we decide your car insurance premium?

The price you’re quoted is made up from lots of different factors, and those factors tend to fall into two groups.

There are factors that are specific to you, for example how likely you are to make a claim.

And there are factors that are influenced by the world around you, which can include things like inflation.

So, let’s take a look at these two groups. 

How you affect your car insurance price

Age and experience

Your age is an important factor when it comes to your car insurance. Younger drivers are generally a higher risk than older drivers, so premiums for younger drivers tend to be higher. The length of time you’ve held your licence can also impact your price. More experienced drivers are less likely to claim and this is reflected in their price quoted.

However, the risk of being involved in an accident increases after the age of 70, so premiums can go up as a driver comes closer to the end of their time behind the wheel.

Type of vehicle

You won't be surprised to learn that the type of car you drive affects your premium. Big, powerful cars usually cost more to insure because it's more expensive to repair or replace them and they can cause more damage if they crash. The tech in your car can be a factor too. The more complex your car is, the more costly it can be to repair.

Having a desirable car also increases the chance of theft, which is another thing we take into consideration.

Where you live

Your address plays a role in the cost of your car insurance. Prices will be higher in areas where the risk of accidents is greater, for example in urban and densely-populated areas. The same applies if you live somewhere with high levels of vehicle crime.

How far you drive

Mileage matters. Spending more time driving means there's more chance of being involved in an accident.

Who drives your car

It’s not just your age and driving history that affects your price; other drivers named on your policy have an impact too. We'll take their age, claims history, convictions and other personal details into account.


A recent motoring offence could increase your premium. We need to know about convictions when you take out your policy. If you don’t tell us, it could invalidate a future claim. 

Previous claims

Your claims history is really important. When working out your price, we look at your recent claims. If you don't make a claim on your insurance, it's a sign that you're a safer driver.

Drivers who don't claim are rewarded with a No Claim Discount (NCD) each year, and the more years’ NCD you have, the better your price is likely to be.


Finally, your excess is a factor when it comes to the cost of your premium - having a higher voluntary excess could reduce the amount you pay for your cover.

How outside factors affect your car insurance price

So, how do things in the outside world affect your price?

Inflation – parts and labour

Inflation increases the price of goods and services, which impacts all of us. It’s getting more expensive to buy car parts and pay for repairs. This increases the cost of providing insurance and therefore the price you pay.

Cost of claims

When more people are driving, the roads get busier and accidents are more likely, which increases the risk for everyone. More claims in general can lead to an increase in our costs, and therefore lead to higher premiums across the board.

Insurance fraud

People who commit insurance fraud push the prices up for everyone else. It costs the industry more than £1 billion each year, and costs policyholders up to £50 each year, so we work hard to stop fraudsters hurting innocent people. 

Changes to IPT

You don’t pay VAT on insurance, instead you’re charged something called Insurance Premium Tax (IPT) This is included in your premium, and any changes to the IPT rate will affect what you pay.

Operating costs

It’s a small piece of the puzzle, but our operating costs play a part.

This is the money it costs us to run the business, including for making sure we have knowledgeable colleagues in our contact centres, and building brilliant online experiences that help you find answers, buy insurance and make changes to your policy.

When it's time to renew your car insurance

Because of all these factors outlined above, your price when you renew can go up or down, but will never be higher than if you were a new customer with the same information and cover.

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