12 Essential factors affecting car insurance premium simplified

car insurance

Have you ever wonder why your friend's car insurance premium is cheaper than yours?

Many a time when a new client was first referred to us,  they would like to know whey their car insurance renewal is more expensive than their friend even when they drive the same model!

We thought this would be a good frequently asked questions, and we would like to explain in this article. Let’s find out what the factors that will affect your car insurance’s premium and how they may affect you.

  1. Age Group – This is the car owner’s age. Most company has similar age group factor.
    • 18 to 21 – most expensive
    • 21 to 25 – quite expensive
    • 26 to 30 – a bit expensive
    • 31 to 65 – safe zone
  2. Driving Experience – This refers to how long did you get your driving license and has nothing to the actual driving experience. This is measured in the number of years.
    • less than 1 – most expensive
    • 1 to 2 – very expensive
    • more than 3 – safe zone
  3. Occupation (Indoor/Outdoor) – This refers to the nature of work, like desk-bound that does not require travel or sales job that requires client meeting at different places in a day.
    • Indoor – no travelling required and hence cheaper car insurance premium
    • Outdoor – travelling is usually required and hence higher car insurance premium
  4. No-claims Discount (NCD) – You will get 10% NCD every year if you do not have an accident. The maximum NCB is 50%.
  5. NCD Protector – This applies to people with 40% or 50% NCB.
    • In the event of 1st accident within the policy year, your NCB will remain as 50%.
    • After which, the 2nd accident will cause your NCB to be reduced to 20% (50% – 30%).
    • If you are super unlucky and have the 3rd accident in a year, your NCB will be reduced to 0% (20% – 30%, you cannot get -10% so it will be 0%)
    • It is important to note that NCB protector is only valid if you renew your car insurance with the same insurance company. If my car insurance is with company A and my NCB is 50%, after the 1st accident (and it is my fault), I still get 50% NCD as I got the NCB protector upon the renewal. However, instead of renewing my insurance with company A, I go with company B. I will only be entitled to 20% NCB.
  6. Certificate of Merit (COM) – This is an additional 5% discount if you do not have any traffic offence or demerit point for the past two years. You only get this extra 5% when you have minimum 30% NCB.
    • For example, your car insurance cost $2000 (before NCB), and you have 30% NCB and safe driver discount, your premium would be $1391 {[2000 – (2000 * 30)] *0.95 * 1.07} with GST.
    • You can check your COM status here
  7. Engine Capacity (cc) – This refers to your car engine in cc. The lower the cc, the lower the car insurance premium
  8. Year of Manufacture – This refers to the year which your car is made/register. The older the car, the cheaper the premium except for antique cars.
  9. Vehicle Body Type – This refers to the type of vehicle. E,g, saloon, MPV, SUV. Some insurers may charge more for a particular kind of vehicle while others may charge lesser.
  10. Engine Type – This usually refers to standard or turbo car engine. It’s important to know that most insurers impose a higher car insurance premium on turbo cars. Some insurance even rejects vehicles with a turbo engine.
  11. Gender – This is insurer dependent. Some insurer may charge cheaper for the male drivers while another company charge less expensive for the female drivers. The rate may be the same for another insurer. We believe it is base on individual company statics.
  12. Off-Peak Car (OPC) – Most insurer gives 5% discount for OPC (e.g. NTUC) while another company provides the same treatment.

Why does my car insurance premium increase when my NCB increases with 5% Safe Driver Discount?

Car Insurance Premium

This is due to the increase of the base premium. Please refer to the example below.

Year 2007, 40% NCB, Base premium $2000, the final premium for 2007 is $1284 {[2000 – (2000 * 40)] * 1.07} with GST.

Year 2008 50% NCB + 5% Safe Driver Discount, but the base premium is increase to $2800, the final premium for 2008 is $1423.10 {[2800 – (2800 *50)] *.95 * 1.07} with GST.

Hence, you see a higher renewal premium even though you have a higher NCB.

Finding the cheapest car insurance

There is no generalisation which company gives the most competitive car insurance rate. This is because some company may specialise in Japanese cars. Some company may have better rates for smaller cc class. Hence, it is best to get quotations a few insurers to obtain quotations with competitive car insuracne premium.