Why is car insurance so expensive

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What makes car insurance more expensive?

Your insurance premiums are based on the type of coverage you have and risk indicators that are specific to you. Your risk factor is essentially how insurance companies evaluate what they should charge you for a premium. This is how they will protect themselves from a loss if they have to pay out for a claim. In this article, we will dive into some of the things that influence the price of your overall premium.

What factors affect your car insurance rates?

Your insurance provider will assess your risk profile based on your own personal details, which typically include:

Your Age

Most premiums tend to decrease as you get older and gain more experience. Insurers will assess your risks by considering how long you have been driving and your driving history. This is why younger and new drivers can often face higher premiums; their lack of experience on the road increases the likelihood of accidents.

Where you are living

Your location provides insurers with much more information than you might realise. It helps insurers work out what risks you might face in your area. Insurers will consider the following:

• The crime rates in your area.
• If you’re living in a densely populated area like a city or near busy roads, where more accidents can occur.
• The number of accidents or claims recorded in your area.
• If you’re living in a gated community with higher levels of security.
• Where you park your car also comes into play; parking in a private driveway or garage usually lowers your risks.   

The type of car you own

The car you’re driving will play a big role in the cost of your premium. Insurers consider your vehicle’s risk profile when determining your insurance costs. If you drive a small car with low running costs, you may enjoy a lower premium. In contrast, high-performance vehicles typically have higher repair costs, which increases the associated risks, resulting in a higher premium to cover those costs. Your car’s insurance group will give you a better idea of what insurance costs you might face

Past driving experiences

If you have a history of making claims, your insurer will view you as a higher risk to insure, and so your premiums will be higher. Factors related to your driving history that can impact your premium include any prior claims on your insurance or having points on your license.

Previous claims also reduce your no-claims bonus. Your no-claims bonus can influence your overall insurance costs, so it’s important to protect it. Learn more about no-claim bonus discounts in our guide here.

Policy choices you have made

There are different types of coverage, which vary in price. Each level of coverage offers different benefits to you in the event of an accident. As a result, you could expect to pay more for higher levels of coverage. The most common types of cover include:

• Third Party Insurance – Will cover damage to a third-party vehicle when you’re at fault, but not your own. This lower level of cover is usually the cheapest option.
• Third Party Fire & Theft – Third party with the additional cover against fire and theft to your vehicle.
• Fully Comprehensive cover – Covers your vehicle and third-party vehicles when you are at fault, as well as fire and theft. This is typically the highest level of cover and often the most expensive policy.

Why is my car insurance so high now?

If you’re seeing an increase in your insurance and your personal circumstances haven’t changed, your increase could be influenced by factors outside of your control. Insurance prices can also be influenced by what’s happening in the world and changes in the automotive industry. Some of the changes we have seen recently include:

Mandatory taxes

Insurance premium tax rates vary each year. Recent reports show that in the last financial year (2024 to 2025), the total IPT receipts were 9% higher than in the previous financial year (2023 to 2024).

Insurance premium tax rates (IPT) are a general tax that’s applied to all insurance premiums; you will typically see this on your car or home insurance policies. There are two main types of IPT rates: a standard rate and a higher rate, usually applied to travel insurance policies or electrical appliance policies. Some vehicle insurance can also fall under this higher rate.

Why is car insurance so expensive for new drivers

As a new driver, your insurance will usually be high as you have no previous driving history for the insurers to compare.

New drivers tend to also be younger drivers, which means you’re statistically more likely to be in a crash than an older driver. Unfortunately, because of the higher risks for new and younger drivers, these groups will face higher premiums. The average annual cost of insurance for young drivers aged 17-24 was £1,251.95 in 2025. It is not long since premiums for this age group averaged at a record high of 3,056 in 2024. Here are some tips for young drivers on how they can save on their insurance.

Related insurance products:

At Quotezone, helping people find better deals is important to us. We can help you search for the best deals on your car insurance with our panel of dedicated UK specialists.

• Older drivers
• Van Insurance
• Temporary Car Insurance
• Annual & Multi-Car Insurance

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This article is intended as generic information only and is not intended to apply to anybody’s specific circumstances, demands or needs. The views expressed are not intended to provide any financial service or to give any recommendation or advice. Products and services are only mentioned for illustrative rather than promotional purposes.