How's does car insurance work

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dan761
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Depending on the car age engine size etc... do you get given say like £2000 a year then pay a bit every month ??
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sek510i
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Car insurance depends on lots of things, like how old and experienced the driver is, what kind of car it is, how powerful the car is, whether or not the car has been modified.....

The more at-risk of an accident you are thought to be, the more the insurance costs. You pay a bit every month or year or whatever, and the insurance company will then pay the money to repair damage or replaced lost property if you meet certain circumstances.

For example, if I got third party insurance and hit somebody, the insurance company would pay for the damage I'd caused. I'd then get charged more money for insurance in future.

How basic an explanation do you want?
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IWMTom
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This thread should really be in Cars and Motoring, tagging AngryJellyfish to get it moved for you.
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Dysf(x)al
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(Original post by dan761)
Depending on the car age engine size etc... do you get given say like £2000 a year then pay a bit every month ??
The premium you pay depends on:
  • Your driving record. If you have none, they'll assume the worst. Infringements such as speeding, previous insurance claims and cancelled policies can increase your premium. Going for several years with no infringements will make it cheaper since you're lower-risk.
  • Age and gender. Young male drivers are statistically the most likely to crash so they get higher premiums.
  • Black box. It's a device installed in your car that measures how you drive. It can reduce premiums, but if you corner, accelerate or brake hard, they are increased. Not all of them are very accurate - it can be a risk, especially if someone borrows your car.
  • Type of coverage. By law, you have to have third-party coverage - this insures you for damage you cause to other property, vehicles and people. However, you can pay more and have your own car covered as well (as in, if it's destroyed, they pay you the value of it) in case of an accident, fire, theft or breakdown.
  • Excess/deductible. If you make a claim, you must pay a certain amount as an excess (say £100). The insurance company pays the rest. A higher excess means lower premiums, but you'll pay more if you need to make a claim.
  • Location. If you're in a high-crime area and covered for theft, you will pay more as you're more likely to have your car stolen.
  • Type of car. Larger engines, sportier and more expensive cars will cost you far more to insure, especially as a new driver.

I think you're right about the monthly payments, but I've heard some insurers allow you to pay for 6 months in one go and get it marginally cheaper.
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Nuffles
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(Original post by TheMindGarage)
I think you're right about the monthly payments, but I've heard some insurers allow you to pay for 6 months in one go and get it marginally cheaper.
Insurers actually prefer you to pay up front - they don't have to trust that you'll pay each month on time. You also save on the interest too. Not to mention it's seen as lower risk to pay for the whole year in one go - people who pay monthly have a higher risk of being in an accident.

I usually pay yearly and once got a quote for monthly - just to see. It was about £700 more expensive to pay monthly than to pay up front.

It's definitely worth it if you can afford it. Then save each month what this year's premium was, divided by 12. Assuming you don't have any accidents or points then your savings will cover your insurance the next year with some left over to treat yourself.
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IWMTom
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(Original post by Nuffles)
I usually pay yearly and once got a quote for monthly - just to see. It was about £700 more expensive to pay monthly than to pay up front.
This shouldn't be the case. When paying monthly, insurers are providing you with a full year of a policy via a credit agreement. The only difference in total cost should be the interest payable, the base premium should remain the same.
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Nuffles
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(Original post by IWMTom)
This shouldn't be the case. When paying monthly, insurers are providing you with a full year of a policy via a credit agreement. The only difference in total cost should be the interest payable, the base premium should remain the same.
It depends on if they want to insure you or not. Paying monthly *does* make you a higher risk to ins. cos., and some may choose to not offer you coverage unless you pay everything up front, leaving you with only more expensive insurers to offer you monthly premiums.
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IWMTom
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(Original post by Nuffles)
It depends on if they want to insure you or not. Paying monthly *does* make you a higher risk to ins. cos., and some may choose to not offer you coverage unless you pay everything up front, leaving you with only more expensive insurers to offer you monthly premiums.
Nah, it's just some insurers don't offer credit terms - it's nothing to do with risk.

They're effectively loaning you the money upfront and giving you a full year of coverage, just the same as going to a finance company and taking out a loan to pay your insurance. Some have in-house credit terms, some don't.
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