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Insurance policy costs

This advice applies to Scotland

This page explains how insurers work out how much to charge you for insurance and what costs you should think about when you're choosing an insurance policy.

How are the costs of an insurance policy worked out?

How much you can expect to pay for your insurance depends on lots of different things. Costs are usually worked out based on what your insurance policy is for and what the risk is of something happening that could lead to you making a claim. The more chance there is that something is likely to happen, the more expensive your insurance is likely to be.

Factors that an insurance company will look at when they are deciding how much to charge you include:

  • your personal circumstances. For example, your age, your state of health or whether you have any particular needs
  • where you live. For example, do you live in an area where there is a lot of crime, or where there is a high risk of flooding?
  • what you plan to do. For example, do you take part in dangerous sports or activities or travel abroad a lot?
  • how many times you've made a claim in the past. The fewer claims you make, the cheaper your insurance is likely to be.


The amount you pay for an insurance policy is called a premium. You can either pay a premium to your insurer in one lump sum or you can pay in installments. Sometimes you may pay slightly more for your insurance if you pay in installments.

It’s up to you to make sure that your premiums are up to date. If you miss an installment you could lose your insurance cover, even if the insurer has not reminded you that your payment is due.

Comparing premiums

When your insurer gives you quote for insurance, they should tell you how much the premiums will be. You don't have to accept the quote. It’s always worth comparing prices with other insurers before you decide to buy insurance.

You should never make your decision to take out insurance based on the price alone. Always look at the level of cover you’re being offered too.

Your premiums may increase when you renew a policy. Either you or the insurer can decide not to renew your policy. When it’s time to renew your policy it's worth comparing the price your insurer is quoting with what other insurers can offer you. You may get a better deal if you switch insurers.

Keep insurance costs down

It's always a good idea to shop around and get several quotes before you take out insurance. However, remember to make sure that you're not skimping on cover.

Insurers may give you a discount if you buy more than one policy from them, for example home contents and buildings cover.

Choose a higher excess. The excess is the amount of money you pay towards the first part of the claim. You can often keep costs down by paying a higher excess.

Some insurance, such as illness insurance, won't pay out during the first few weeks. If you can wait even longer before taking a pay-out, you may keep the costs of your insurance down.

Remember, it may be cheaper to pay your insurance premiums in one go, rather than in instalments.

Build up your no claims discount. This means you can reduce your insurance costs by a significant amount if you don't make a claim for several years. It's often worth choosing to pay extra premiums to protect your no claims discount as the overall cost of your insurance will still be lower.

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