An insurance premium is the amount charged for cover, based on the policy, the risk and the details you provide.
An insurance premium is the price charged for an insurance policy. It is often shown as an annual amount, even if you choose to pay by monthly instalments.
The premium pays for the cover set out in your policy. However, paying it does not mean that every loss or event is covered. Any claim will still be subject to the policy terms, limits, conditions and exclusions.
Your premium is different from your insurance excess. The premium is the price of the policy. An excess is the amount you may need to pay towards a claim. MoneyHelper explains how insurance excesses work.
Insurers use underwriting to assess the chance and possible cost of a claim. In general, a higher level of risk may result in a higher premium.
The Association of British Insurers explains how insurers assess risk using claims data, statistics and the details provided by the customer.
The questions asked will depend on the type of insurance. They may cover:
For motor insurance, factors can include your age, occupation, driving record, vehicle, address, security and where the vehicle is kept overnight. Insurers use their own data and pricing rules, so similar policies can have different premiums. The ABI provides more detail on motor insurance pricing factors.
A higher voluntary excess may reduce the premium in some cases. However, you would need to pay more towards an eligible claim.
Check the full price shown on your insurance quote.
Most car, van and home insurance premiums include Insurance Premium Tax at the standard rate of 12%. Some types of insurance are charged at a higher rate or are exempt.
The total price may also include:
Paying monthly can help spread the cost, but it may cost more overall. MoneyHelper says insurers sometimes charge interest on monthly instalments.
A cheaper premium does not always mean better value. It may come with higher excesses, lower cover limits or more exclusions. Compare the cover and terms as well as the price.
A quoted premium is based on the information available at the time. It may change if you update your details before the policy starts.
The price may also change if you amend the policy during the year. For example, changing your vehicle, address, drivers, property use or cover could lead to an extra premium or a refund. An administration fee may also apply.
Your premium will be reviewed again at renewal. Under the FCA’s current home and motor renewal pricing rules, a firm must not set a renewal price higher than the equivalent new-business price. The detailed comparison uses the channel through which the customer originally bought the policy, subject to the rules and exceptions.
This does not mean your renewal price cannot increase. Claims costs, repair prices, risk details and the cover selected may have changed.
Answer all questions carefully and check your policy documents.
Under the Consumer Insurance (Disclosure and Representations) Act 2012, customers must take reasonable care not to give an insurer incorrect or misleading information.
A misrepresentation could affect the premium, policy terms or a future claim. What an insurer can do will depend on the details, whether the error was careless, deliberate or reckless, and what it would have done with the correct information. The Financial Ombudsman Service explains how these cases are assessed.
Check your policy terms to see which changes you must report during the policy. You must take reasonable care when answering questions as you buy, renew or change the policy. Your documents should explain any disclosure or notification duties that apply.
We arrange insurance through insurers and do not underwrite every policy ourselves.
We may be able to arrange car insurance, van insurance, home insurance, landlord insurance and convicted driver insurance.
We can explain the premium offered, payment options, excesses, fees and key policy terms. The price and availability of cover will depend on the full details, the insurer’s underwriting rules and the policy terms.
An insurance premium is the price of an insurance policy. It is separate from the amount you may pay towards a claim.
Before taking out or renewing cover, check the full annual cost, payment charges, excesses, limits and exclusions. Compare policies on a like-for-like basis rather than looking at price alone.
