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How van insurance is calculated
Most drivers often wonder how insurance companies work out the cost of their premium. Many of us do not understand how the day to day activities we undertake through our driving life affects our annual insurance premiums. So, how do insurance companies work out what we pay for them for our insurance?
It doesn’t matter whether you choose to get a quote online or over the phone, you will find that all insurance companies will ask you a series of questions. By doing this, the insurance company can identify what risks they are taking by providing you with van insurance and therefore work out an accurate quote using the information you have provided to them.
All insurance companies evaluate the same factors when they calculate van insurance prices. However, no two risks are completely the same so therefore insurance prices can vary from one company to the next.
The main factors all insurance companies will take in to account are highlighted as follows:
Van insurance groups
The Association of British Insurers (ABI) in conjunction with Lloyds Market Association (LMA) are responsible for meeting on a monthly basis to discuss and establish the insurance group of every private motor car registered in the UK.
Thatcham are then responsible for carrying out the administration of the insurance group rating scheme.
All vehicle group ratings are determined by factors such as:
- The value of the vehicle
- Vehicle performance, acceleration and its top speed
- Parts Pricing; including how much the parts would cost to replace/repair
- What level of security is in place on the vehicle
You can refer to Thatcham to do a search of their database for vehicle groups as this information is held on their website as part of their admin role.
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Driving and Claims history
Driving and claims history is one of the most important criteria when insurance companies are gathering data to provide you with a van insurance quote. The Insurer will most likely need to know about your claims history for the last three to five years.
If you have previous claims, then you are more likely to be quoted with a more expensive your insurance policy. However, if you do not have any claims history then you will be considered a safer driver and will be rewarded with a lower insurance premium.
The more you use your insurance, the more your van insurance policy will cost you.
It is worth nothing that insurance companies need to know about any claims; regardless of who was to blame.
If you insure your van and do not make a claim then you will be awarded a ‘no claim discount’. The longer you go without making any claims, the higher your ‘no claim discount’ will become. You will earn more insurance discounts for every claim-free year, up to a set limit of around about 70%. This discount is dictated by each insurance company.
It’s usually possible to protect your ‘no claim discount’ by paying a small additional premium when you take out your policy. This additional sum ensures that your no claim discount remains unaffected regardless of any claims for the life of your policy. Once again, this helps you to obtain lower cost van insurance quotes.
Drivers
Van insurance companies will be very interested in the drivers that you wish to be covered on your policy. Depending on the experience of every additional driver there could be an extra charge to your policy.
If your van is going to be used for business purposes and driven by a number of different drivers then the ‘Any driver insurance policy’ is probably the best option for you. This type of insurance policy gives you much more flexibility than named driver policies and can save you time and money.
Some of the ‘Any driver insurance policy’ benefits include Breakdown and accident assistance, Legal expenses, provision of a hire vehicle in the event of a non-fault accident amongst many others.
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Van Insurance and speeding
Although most people would not condone speeding, van drivers are usually in their vehicle for a large proportion of their working day or night and therefore are more at risk of being caught speeding than the average motorist.
The UK government have been installing increasing amount of speed cameras on all roads throughout the UK over the past few years in an attempt to reduce speeding accidents.
It’s fair to say that most motorists today worry about being caught speeding and that moment of being captured on camera as there is very little you can do to avoid the punishments. It does not matter whether you are caught knowingly speeding or whether you have crept above the speed limit by accident as the fact is you were speeding and therefore have to face punishment of a fixed fine, penalty points and suffer the prospect of increased van insurance premiums.
When renewing a van insurance premium you are legally you are required to disclose any driving offences and speeding endorsements you have received to your van insurance company. The number and type of convictions will have a large bearing on the premium your van insurer will charge you.
In all cases, it is a good rule of thumb to remember that the more convictions and points on your licence you have, the more you are going to pay for your van insurance.
As a result of speeding endorsements you will be classed as a high risk driver by the van insurance companies and this will therefore affect your van insurance premium. Any penalties you have accrued on your license will mean you are at risk of being priced out of the insurance market and may not be able to get a competitive insurance quote at all. There are many insurance companies who will put a huge premium on to a policy where you have to disclose speeding endorsements as they will consider you as a high risk driver. This means the insurance company perceives you to be more likely to make a claim on your van insurance policy.
As speeding convictions now seem to be very common throughout the UK there are many van insurers who will not penalise drivers too heavily for just one speeding conviction. It is usually drivers with more than 6 points on their licence that insurance companies believe to be a high risk. These insurance companies believe that if a van driver has accrued several speeding convictions that they are more likely to have an accident due to their reckless attitude towards driving.
If you are a van driver where driving is your livelihood then your insurance usually comes at a higher cost. Therefore it is imperative to be able to find a competitive insurance quote. If not, this can leave you with a hefty premium which can leave you significantly out of pocket. Any van drivers who want to find van insurance at a reasonable rate had better take note of speed limits of the roads on which they are travelling to ensure they are not caught out by speed cameras. However, there could be an alternative solution which does not affect your van insurance policy.
More recently, some Police constabularies have indicated they will be offering an alternative to speeding drivers. This new option would be for the offender to pay for remedial driving tuition instead of the usual fines which would affect the insurance premiums. Many professional drivers are plumping for the option of these lessons instead of points on their license in order to keep their van insurance premiums to a minimum. Although it is worth taking note that this option can only be selected once every three years. Some driving organisations seem supportive of this plan to re-educate accidental speeders but this attitude is not shared by Road Safety groups.
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Medical conditions
Insurance companies cannot charge you extra money for medical conditions if you hold a license without restriction.
If you hold a restricted license then your insurer may need to take this into account when reviewing the risk and charge you a premium on your van insurance.
Everything that may have an effect on your ability to drive has to be noted by the DVLA. Their website holds more information regarding driving and medical conditions to help you with any queries.
Van Insurance and Mileage
Van Insurance premiums are affected by several factors. One of these factors is annual mileage.
Annual Mileage for your van is the distance you will travel in miles over the period of one year. Many insurance companies will want to know if you will be using your van for work and how many miles you anticipate on driving for these purposes. The figure you provide to the insurance company is known business mileage and this figure is also included as part of your annual mileage. Please note that business mileage does not include commuting to and from your place of work.
The van insurance company will need you to provide them with an approximation as to how many miles you will be travelling in a year. You should ensure the mileage estimation you provide to the van insurer is as accurate as possible.
Van insurers will not expect you to be 100% accurate with the mileage and this is why they call it “estimated”, however in the event of a claim the van insurance company may request service records or MOT certificates to check the mileage you stated when taking out the policy is averagely accurate.
Please be advised the insurance company may charge you extra if your mileage is way above the figure you stated when you got the original van insurance quote.
Most van insurance companies work on the basis that if your van is on the road a lot and you anticipate on a high annual mileage then you have more chance of being involved in an accident. They work on the principal of the higher your mileage, the higher your premium. A higher than average annual mileage increases the risk that you pose to your van insurer, so it is important when entering your details for a van insurance quote that you provide the accurate annual mileage.
However, another train of thought from some insurance companies is that if you drive very few miles per year that you are less likely to be used to the handling the van and therefore you may be a nervous driver or your inexperience on the road may make you more likely to have an accident.
In most cases the van insurance companies are happy to give you a good discount for not using your van as much. The reason for this is due to less van usage on the road so they believe accidents are therefore less likely to occur.
The fact is that your insurance premium is affected depending on how much mileage you build up on an annual basis. This could work in your favour if youtravel less; or work against you if you travel more each year.
There are some insurance companies that specialise depending on your average annual mileage. For example, there are some insurance companies who will agree to charge you a set rate per mile, whereas other insurance companies will offer you a good discount if you agree to travel less than 4,000 miles annually.
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Occupation
Occupation is one of the most important rating factors when it comes to van insurance policies.
The reason for this is that some occupations carry risks, some may involve more driving creating higher risk of an accident and others may require more care when delivering their loads meaning a less risk occupation.
If your occupation involves the transit of dangerous / hazardous goods such as chemicals or explosives then some insurance companies may not even be prepared to give you a van insurance quote as they are not interested in the risk factor associated with your line of business. If you fall into this line of occupation then you may be looking for a specialist insurance firm who is prepared to encounter this type of occupational risk.
There may also be a high risk associated with those occupations which mean that you spend a lot more time in the vehicle; these could be occupations such as delivery drivers. The reason this type of occupation is classed as high risk is because the van driver would tend to be on the road all day, in and out of the vehicle making deliveries. Insurance companies believe the more time you spend on the road, the more likely you are to have an accident. Therefore, an occupation which means you spend a lot of time on the road would be classed as high risk by an insurance company.
Other high risk occupations would be associated with those trades where transportation is required for expensive goods as this could mean the van is more likely to be targeted by thieves. This could include items like electrical goods, for example; as they are easy for thieves to pass on.
There are several occupations which would be classed as lower risk to insure meaning this type of van driver would potentially pay less for their van insurance policy. These occupations would include something like a builder as they travel to work in their van but it is a likely factor that it will be parked up all day whilst they carry out their work. Other low risk occupations also include roles like a florist as they do not spend too much time in their van and they are likely to take a great deal of care whilst driving their flower bouquets and displays.
Van insurers consider all occupations when calculating for an insurance premium.
Whatever the occupation, it is necessary to correctly inform the van insurance company of your vehicle expectations when obtaining a quote. If you fail to do so and you need to make a claim it could invalidate your insurance, thus becoming void meaning that you would be liable for any costs incurred.
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Security
Contents of a van are usually often a prime target for thieves because their contents can be full of rich pickings so if you are a van owner then security should be a key concern to keep your possessions safe to reduce the need for any claims on your van insurance policy.
Purchasing a fully comprehensive insurance cover from a reputable company should be at the top of your list for keeping your van secure, but the price of your premium can be significantly affected depending on what security features you have installed.
Some security items which could help you to reduce your van insurance premiums are as follows:
- Alarm
- Van window blanks
- Immobiliser
- Locking wheel nuts
- Lockable fuel cap
- Removeable stereo
- Slam locks
- Steering wheel lock
- GPS Tracker
Some insurance companies will give you a discount if you have certain Thatcham approved security devices in place on your van; thus lowering your annual premium.
Van Use
It is important you disclose the use of your van to the insurance company as what you intend to use your van for will have an effect on your insurance premium.
Some occupational uses means your van is being used in a way that makes it more likely for you to be involved in an accident or damages that will result in a van insurance claim putting you in a high risk category. Alternatively, there are minimal uses whereby you may only use the van for personal reasons such as to get to and from the shop meaning you would be in a low risk category.
The different categories of vehicle use are as follows:
- Social, domestic and pleasure – covers you for day to day personal driving. It does not cover you to drive to work.
- Social, domestic, pleasure and commuting - you are covered as above but it also includes driving to one place of work.
- Business use - you can use your vehicle for your job and includes driving to more than one place of work.
- Commercial travelling - you can use your vehicle for commercial reasons like deliver driver.
You must tell your insurance company exactly what you plan on using the van for. Your van insurance policy documentation will state what use you are covered for, so all information needs to be accurate to ensure you don’t invalidate your insurance.
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Van Insurance affected by your Address
Your home Address is a very important factor to your van insurance company because of the costs they associate with the availability of criminal statistics rated by post code. This means the insurance companies are able to profile crime statistics areas across the UK to see where the highest and lowest insurance risks are based and then price your van insurance accordingly.
Information regarding your address can also explain why people who are driving the same van as you in the same town can sometimes pay different insurance costs. This is simply because they live in a different street to you where the crime rate could be higher or lower.
As you tend to find more vehicles on the roads around inner city areas and built up areas you may incur a higher premium if you live in such an area as your van insurance company will probably perceive that you’re more likely to make a claim as a result of being involved in an accident whilst on these busy roads
Living in a busy area could cause a further problem for your van insurance company as they believe there is more chance for you to be hit by an uninsured driver; which means they would be liable to pay for any claims you needed to make.
Also, when assessing the potential theft risk for van insurance the insurance company will also consider your address to see if you live in an area of high crime. Every town throughout the UK has areas that are considered higher risk than others by van insurance companies; thus increasing the cost of an insurance policy.
However do not be disheartened as sometimes you address could work in your favour. For example, if you live in an area which has a history of low claims and a low crime rate, this will be reflected in a lower van insurance premium.
You home address however does not take in to account the area where the van will be regularly being driven, so it may not feel the risk profile undertaken by the insurer has been done fairly in some cases. Many vans will spend less time at the home address where the policy is registered in comparison to area’s where it is being driven for business purposes.
When taking out a van insurance policy you need to keep in mind that any incorrect information provided to your van insurance company could invalidate all or part of your policy; so ensure all information is accurate and up to date.
If you feel like your address is bringing about a higher van insurance premium then check out our Van Insurance Guide to see if and how you may be able to reduce this cost.
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