The price you pay for your car insurance is known as the ‘premium’.

Premiums are quoted annually (although you can usually pay monthly if you want).

When calculating your car insurance premium, insurance providers will check how much of a risk you are when driving. To do this, an insurer will want to know things such as:
· how likely are you to cause or be involved in an accident
· how much your car would cost to repair or replace
· are you a good driver

The insurance provider will also use statistics and claims data to calculate your premium.

When you apply for car insurance, the provider will ask you a variety of questions. These include:
· your age and relationship status
· your address
· your annual mileage (how many miles you expect to drive each year)
· your driving experience
· the make and model of your car, engine size, and any modifications
· where you keep your car overnight (i.e. garage or on the road)
· previous car insurance claims
· any driving convictions
· what you will use your car for (i.e. social and domestic use, or commuting to work too)
· who else will drive your car
· your occupation

Incorrect information could mean the insurance provider won't pay out in a claim on your policy, so try to ensure this is as accurate as possible.

You can choose extras to add to your policy. These can vary between insurance providers but it's common to see extras such as breakdown cover, legal cover, personal accident, windscreen cover, and courtesy car.

By adding extras to your insurance policy, you'll increase the cost of the premium, which means the price you pay monthly or annually will be higher. You should think carefully about which extras, if any, are best for you and your needs.

A modified car is one which has had changes since it was produced by the manufacturer. This includes extras that have been added such as alloy wheels, exhaust changes, or tinted windows. If you're buying a second-hand car, you should check if any changes have been made.

Modifications can impact the value of your car and your likelihood of having an accident, so insurers will want to know about any changes you may have made to the vehicle since it was manufactured.

Excess is the amount you’ll have to pay towards any claim that you make to your insurance provider.

Excess is broken down into compulsory excess and voluntary excess. The total excess on your policy is the compulsory and voluntary excess added together.

Compulsory excess is the amount you’ll have to pay to the insurance provider if you need to make a claim on a policy.

Voluntary excess is the amount you can add to your compulsory excess. This can help to reduce the price of the insurance premium, so you pay a lower amount monthly or annually. But, you’ll have a higher amount to pay if you need to make a claim.

For example, you may make a claim for £1,000 but have an excess of £200. This means that you must pay the first £200 of the claim and the insurance company will pay the remaining £800.

A telematics policy is different from a usual car insurance policy. These policies change your premium based on your driving habits. For example, if you use more fuel or frequently speed, it's likely your premium will increase.

To have a telematics policy, a tracking device or black box will be installed in your car.

This type of insurance is sometimes known as black box car insurance, GPS car insurance, or smartbox insurance.

These policies are usually aimed at younger drivers to encourage safer driving. This could lower the cost of your insurance policy.

There are three different types of car insurance cover:

• Third party insurance — this is the minimum level of cover legally required to drive on the UK’s public roads. It covers injuries caused to others and any damage to their vehicles. This cover includes passengers in your vehicle and other people’s, but does not cover you or your car.

• Third party fire and and theft — these policies cover the above, but also include damage caused by a fire or car theft.

• Fully comprehensive insurance — this offers the highest level of cover available, including damage to yourself, your vehicle, other people, and their vehicles. This type still covers you even if you’re found to be at fault in an accident.

These policies usually last for 12 months and need to be renewed every year. Some insurance providers will automatically renew your policy once 12 months has passed. Check if your provider does this.

You can choose extras as well, such as breakdown cover, but this will cost extra.

There are four main vehicle uses (sometimes known as class of use). You need to pick one based on what you'll use your vehicle for:

• Social, Domestic and Pleasure (SDP): casual, everyday use of a car. This can include going to the shops and visiting friends or family.

• Social, Domestic, Pleasure, and Commuting (SDP + C): this is the same as SDP but also means you're covered for trips to a single workplace.

• Personal Business use: for those who drive to lots of places away from your permanent place of work, (not including delivery drivers) e.g. if you travel to lots of different offices on a weekly basis. This also covers SDP + C.

• Commercial use: when a vehicle is used for door to door or travelling sales.

The cost of your policy will depend on which one you choose. This is because how you use your vehicle could change how likely you are to have an accident. For example, if you get SDP + C, you’ll likely be travelling at busy commuter times where the risk of an accident may be higher.