Car insurance and where you live

One of the most valuable pieces of information you give car insurance companies is your postcode. They use this, along with other pieces of information, to work out the cost of your premium – and all their calculations are based on the likelihood of you making a claim.

In the 80s insurers had seven different types of area that they categorised policyholders homes into. These ranged from the inner cities to rural areas, and would show how likely a person was to have their car stolen or vandalised. But, as insurers gathered more data they could pinpoint more accurately which specific postcodes were the highest risk areas.

Car insurers now use your entire postcode to determine the risk to your car. The first section (eg. NG12) shows which city you live in, and where in that city you live – for example, the centre, or perhaps a suburb. The second section (eg. 4FY) indicates where within that specific area your home is. There may be certain streets that have higher crime rates, and so premiums for that postcode will be higher than for other postcodes.

Insurers then group these high risk postcodes to work out exactly how much extra someone should pay on their premium if they live in that area.

Unless you would seriously consider moving house to get a cheaper insurance premium there is little you can do. But, there are lots of other changes you can make to keep your car insurance premium down. It’s not as difficult as you might think to find cheap car insurance For example, by making sure your car is cheap to insure you can make huge savings on your car insurance.