An insurance company considers many things when calculating an insurance premium. Most premiums are based on basic third party cover with the cost of extras added on. The main thing that will determine the cost of your insurance is what you actually want to be covered for. The following are always taken into account:

Whether you are driving on a full or provisional licence makes a huge difference to the cost of your motor insurance premium. You can expect to pay hundreds of euro extra, if you only have a provisional licence.

Size and age of car
The engine capacity and age of the car play a large part in determining the cost of your premium. The older the car, the more difficult it can be to insure. Many insurance companies believe that the older a car is, the more accident-prone it becomes. A new car is more expensive to replace than an old car and will cost more to insure. Likewise, the more powerful the car you drive, the more it will cost to insure.

Age of the driver
The young and the old represent high-risk categories and pay more for insurance.

Value of the car
The value of a car is taken into account for third party, fire and theft and for comprehensive insurance. What you have the car insured for, however, is not always what the insurance company will pay out in the event of a claim. In the event of the car being a write-off, the insurance company will only pay out what it feels the car is worth, which, more often than not, is less than the car is actually insured for. There is very little to gain by over-insuring a car and, equally, you should not under-insure it either.

All insurance companies will ask if you have ever had insurance in your own name before. If not, they will ask if you have ever driven under someone else’s insurance without incident. This will be taken into account when calculating a premium. Insurance becomes less expensive with experience and a clean driving record.

Profession and use
Some professions are considered to be more at risk than others and will have a loading put onto their premium. What the car will actually be used for is also taken into account. A standard policy covers the vehicle for social, domestic and pleasure purposes, but not for the carriage of goods. If the car is being used for business, then a loading will apply. If the car is being used commercially, then an even higher loading will be imposed

Excess and extras
Most insurance policies contain some type of an excess clause. This means that the policyholder is liable for an agreed amount towards the cost (e.g., the first $550). The premium will cost more if this clause is taken out. It pays to shop around, because what might be considered an extra in one company (windscreen breakage, car hire in the event of the car being off the road, loss of personal effects, etc.) could be standard in another.

No claims bonuses
A no claims bonus is built up over the years and gives the policyholder a substantial reduction in the cost of his or her premiums. The ceiling for a no claims bonus is usually 50%, leaving someone who has never had a claim with only 50% to pay. In the event of a minor accident, it is sometimes cheaper to pay for any damage out of your own pocket rather than claiming from your insurance and losing your no claims bonus. If you make a claim and subsequently lose your no claims bonus, you can build it up again in a few years. Some insurance companies will even allow you one claim without it affecting your no claims bonus.

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

  • 1. Last year premium S$630.00 with NCD protection. Had a claim last year and this year renewal premium gone up to S$1,127.11. Although NCD remains at 50% as I paid extra for protection but premium gone up almost 100%

    2. Geographical limit amended to cover only within S’pore after renewal with same insurance company same cover type “QualityPlus”. This was not even hightlighted to me during renewal. I’m just driving a simple Toyota Wish.

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