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How Where You Live Affects Your Car Insurance Premiums

Did you know that where you live can significantly affect the cost of your car insurance? We Take A Look At How Car Insurance is Worked Out

Jul 21, 2014

You probably know that your postcode affects how much you pay for your home insurance. But, did you also know that where you live can significantly affect the cost of your car insurance?

Living in a poor postcode area can add hundreds of pounds to your car insurance premiums – and it’s not for the reasons that you might expect. Here, we look at the factors that affect the price of your car insurance and how your postcode helps to determine what you’ll pay. We also reveal the best and worst places to live for cheap car insurance. Keep reading to learn more.

How is the price of your car insurance worked out?

Car insurance providers consider a range of risk factors when calculating your car insurance premium. These include:

  • Your age
  • The number of claims or accidents you have had
  • Your postcode
  • The make, model and value of your car

Insurance providers use this information to calculate the risk you may pose on the road and the likelihood of you making regular claims. Your postcode is a factor that affects your premium and next, we look at why.

Why your postcode has an effect on your car insurance premiums

There are a number of ways in which your postcode affects how much car insurance you pay.

Firstly, if you live in an area where crime statistics show your car is more likely to be broken into or vandalised this is likely to make your car insurance policy more expensive. This is simply because the risk to your car is higher. This increases the likelihood of you making a claim and that makes your premium higher as well.

However, the cost of accident repairs and injury claims also affects your premium and different postcode areas have different statistics.

Rhodri Charles from motor insurer Admiral explains: “Liverpool, Manchester and Birmingham postcodes are higher risk than London. There are just as many accidents in London but each one costs less in terms of damage and claims, probably because of the congestion and slower moving traffic.”

Adrian Webb from insurer esure agrees. He says that because 90 per cent of all car insurance claims occur within five miles of a car driver's home, whether due to an accident, theft or vandalism, the postcode is a significant factor in calculating your premium. He says: "It's not really to do with the driver who lives there but with what other drivers are doing and the people they'll run into."

A third reason that your postcode affects your premium is down to the incidence of personal injury claims in your area. In postcodes where there have been a high number of these claims premiums have risen significantly.

For example, the Daily Mail recently reported that Birmingham has the highest number of fake whiplash claims in the UK. The newspaper reports that these claims add £90 to the cost of car insurance – making these postcode areas more expensive.

Revealed: The best and worst places to live for cheap car insurance

SmartWitness recently conducted a survey of the cost of car insurance in all of the UK’s cities. The research found that Birmingham holds the top ten worst addresses for the highest premiums in the country and that motor insurance premiums in the city are now seven times higher than Aberdeen - the UK’s cheapest city for car insurance.

The price of insuring a BMW 3 Series in Bordesley Green, Birmingham B9 - the worst postcode found - was £1,101.62 per year compared with Aberdeen city centre which comes in at only £157 for the same car.

The other worst postcode areas to live in are in Liverpool (L4 and L33), Sheffield (S4), Bradford (BD3) and Manchester (M13).

The research found that Derby was the 17th cheapest city for car insurance in the UK while Nottingham was the 20th cheapest.

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