How your job title affects your insurance premium
Do you want to keep your insurance premiums as low as possible? It’s a rhetorical - some would say silly – question. Of course you do! That’s why you should always take time to shop around. But getting the lowest price isn’t only about comparing quotes - it’s also about understanding some of the slightly more subtle aspects of how premiums are calculated. Sometimes, just by being aware of how insurers assess risk, you can save yourself some money.
Because, of course, risk is what it’s all about. The bigger the risk you pose to an insurer, the more you pay. Simples. So, to determine your premium, the provider will look at various factors, ranging from your occupation and annual mileage to your address and driving history, and use historical statistics for each category to calculate how likely you are to make a claim. This will be the basis for any quote they give you. But we’re telling you nothing new - none of this is likely likely to come as a surprise.
What you may not know is how the aforementioned risk statistics can vary significantly with subtle changes in your situation. What do we mean? Well, take job title for example – your occupation can provide useful information about how likely you are to claim. Now, we know that you’re not going to be gobsmacked at the news that, statistically, racing drivers pose a higher risk to insurers than accountants. But you might find yourself lifting an eyebrow when you learn that even very similar job titles can result in different premiums - for example, construction labourer and bricklayer, or chef and kitchen worker. So if your job title fits in more than one category, it might be worth checking quotes for all of them. While you should never lie, you can – and should - adjust your job description to give the lowest premium.
Or take your address. As 90% of all car insurance claims occur within five miles of the driver’s home, an insurer will assess risk by looking at factors such as the ‘claim rate’ for the area, how many uninsured drivers may live there, and the level of theft and vandalism. Thus, if you live on the Isle of Skye, for example, you’re almost certainly going to pay less than if you live in Bradford city centre. Again, you’re unlikely to be shocked by this news. Slightly less intuitive, however, is the attitude that some insurers have towards risk reduction. While you might understandably think that parking your car in a garage overnight will attract lower premiums, not all insurers see it that way - some see this as an opportunity for you to damage your car as you drive in and out, so a lower insurance premium is not guaranteed. So, before signing on the dotted line, it’s worth checking out what will and what won’t qualify you for a lower rate.
And on the subject of parking, there’s a myth that leaving your car in the same place every night leads to lower car insurance. But this isn’t necessarily true. While you should try to be as consistent as you can when parking, insurers accept that there will be times when you may have to park elsewhere - such as when you’re away from home, for example. It’s worth noting, though, that if you do change your regular parking habit for any reason, you should notify your provider as soon as possible.
These are just a few examples of how statistics can defeat common sense in the insurance industry. The problem is that, by identifying with a group (e.g. accountants), you are assumed to pose the same risk as the group collectively. But this isn’t necessarily the case. You are an individual, and pose an individual risk. And insurers are beginning to find ways to make use of that individual (as opposed to group) risk. One example is telematics insurance.
Also known as black box insurance, telematics insurance is a clever way of using technology to calculate risk (and therefore provide an insurance quote). It employs a black box fitted to the car, or a smartphone app, to tell the insurer how you actually drive (as opposed to how you might drive, based on group statistics), and is usually used by young drivers and students, who are often penalised for their inexperience (at Desperateseller.co.uk, we know of a young man whose quote to insure a 10-year old BMW X3 was nearly £3000 – more than the cost of the car itself!). It’s not a magic bullet, though. If, for example, you go the telematics route, and then hit the roads like a rally driver, you could face bad news when you renew your insurance. But if you drive sensibly, using a black box could reduce your premiums.
In short, as we said in a previous post, insurance policies can be confusing and, unless you’re careful, can cost you money. This is another example. While you should never lie when filling in an application form, make sure you take advantage of all legitimate ways of saving money that you possibly can.