Car insurance premium rate: understanding and optimising costs
03/05/25
8
Minutes
Katrin Straub
Managing Director at nextsure
The premium rate is a decisive factor in the cost of your car insurance. Find out how it is calculated and what levers you can use to reduce your premium. With the right knowledge, you can save hundreds of euros every year.
The topic in brief and concise terms
The premium rate in motor insurance is a percentage that depends on the no-claims bonus class and has a significant influence on the premium amount.
In addition to the no-claims bonus class, regional and vehicle type classes also affect the cost of your car insurance.
By driving without accidents, choosing the right tariff and making further adjustments, you can actively reduce your premium rate and thus your insurance costs.
Quick Facts: Decoding the Car Insurance Premium Rate
The contribution rate is a percentage applied to the base premium of your motor insurance. It depends directly on your claims-free class (SF class). The longer you drive without an accident, the lower your contribution rate becomes, often up to a discount of eighty per cent. Insurers set the exact percentages for each SF class individually. This contribution rate applies to motor third-party liability and comprehensive insurance, but not to partial comprehensive cover. Understanding these basics is the first step towards optimising your insurance costs.
Practical section: How your no-claims bonus class affects the premium rate
Your no-claims class (SF class) is the most important lever for your premium rate. After each claims-free year, you move up to a higher SF class, which lowers your premium rate. New drivers often start in SF class 0 with a high premium rate that can be over one hundred per cent. For example, if you drive for five years without an accident (SF class 5), you can expect a premium rate of around fifty to sixty per cent, depending on the insurer. A specific example: at Allianz, drivers in SF class 1 pay a premium rate of fifty-eight per cent for third-party liability, while in SF class 35 it is only twenty per cent. The differences can therefore amount to several hundred euros per year. An overview of the SF classes helps you understand your classification. This system directly rewards defensive driving financially.
Here is an illustrative example of how the SF class can affect the premium rate (the exact values vary depending on the insurer):
SF class 1/2 (driving licence held for over three years, first-time insurance): approx. seventy to eighty per cent premium rate
SF class 1 (one claims-free year): approx. sixty to seventy per cent premium rate
SF class 5 (five claims-free years): approx. forty to fifty per cent premium rate
SF class 10 (ten claims-free years): approx. thirty to forty per cent premium rate
SF class 35 (thirty-five claims-free years): approx. twenty per cent premium rate
An incident, on the other hand, leads to a downgrade to a lower SF class and therefore to a higher premium rate in the following year. It is therefore often worth considering paying for minor damage yourself to avoid a downgrade. You can find the exact rules for downgrading in your policy terms and conditions. Understanding these relationships is crucial to fully answer the question, "What does premium rate mean in motor insurance?" and to identify potential savings.
Further key factors: regional class and type class in detail
Besides the SF class, two other important factors indirectly influence your premium rate by determining the base premium of your insurance: the regional and type classes. The regional class reflects the claims record of your vehicle registration district. If you live in a region with statistically few accidents and claims, you benefit from a lower regional class and therefore potentially lower costs. There are twelve regional classes for motor third-party liability, sixteen for comprehensive cover and nine for fully comprehensive cover. Large cities often have higher regional classes than rural areas; Berlin, for example, often has one of the highest ratings. A type class table can provide clarity here.
The type class, in turn, assesses your specific car model based on its claims and accident record. Vehicles that are statistically less likely to be involved in accidents or incur lower repair costs are assigned a lower type class. The German Insurance Association (GDV) assesses around 32,000 different vehicle models each year. So even when choosing your vehicle, you can set the course for a cheaper insurance premium. Type class ratings are assigned separately for third-party liability (classes 10-25), comprehensive cover (classes 10-33) and fully comprehensive cover (classes 10-34). These factors explain why the costs of car insurance are so individual.
Expert depth: Legal foundations and current rulings
The calculation of the premium rate and classification into no-claims bonus classes are regulated in the General Conditions for Motor Vehicle Insurance (AKB) of the respective insurer. There is no statutory regulation governing the level of the percentages; insurers set these discount scales themselves. The German Insurance Association (GDV) does provide statistical data for regional and type classes, but these are not binding on insurers. Recent rulings often concern downgrading after a claim or the transfer of no-claims bonuses. For example, a transfer of an SF class to another person (e.g. a child) can only be made to the extent that the recipient could themselves have accumulated driving experience. Our expert tip: Check your premium statement carefully every year, especially for changes in the type and regional class, as these can also lead to premium adjustments even without any fault on your part. If your premium increases due to a changed regional or type class, you often have a special right of cancellation. This is especially relevant if you are considering whether partial or comprehensive cover is more suitable for you.
Design tips: How to actively lower your contribution rate
To optimise your premium rate and therefore your overall car insurance premium, there are several approaches. Always drive defensively and accident-free to move up into higher no-claims classes – this is the most effective way. For minor claims, consider paying for them yourself to avoid a downgrade and thus a higher premium rate. Limiting the circle of drivers, for example to just you and your partner, can also reduce the premium. Our expert tip: use comparison portals to check the offers from different insurers, as premium rates for identical no-claims classes can vary. This is especially true for young drivers, who often start with high classifications. The possibility of transferring no-claims discounts should also be considered.
Further ways to save include:
Choosing a higher excess on comprehensive insurance.
Stating a lower annual mileage, if applicable. (Find out more about driving fewer kilometres)
Checking special rates for certain occupational groups (e.g. public sector employees).
Choosing a vehicle with a favourable insurance classification.
By combining these measures, the question "What does the premium rate mean for my car insurance and my wallet?" can be influenced positively. Comprehensive insurance offers additional protection, the cost of which is also influenced by these factors.
Your path to the ideal car insurance with nextsure
Understanding the premium rate is the key to cost-effective motor insurance. As you have seen, many factors play a role, from your personal driving history to statistical characteristics of your vehicle and place of residence. At nextsure, we help you keep a clear overview and find a tailored insurance solution for your Car & Mobility that is ideally suited to your needs. We help you navigate the complexity of the premium rate and make full use of all savings potential. An individual analysis of your situation can often reveal significant savings while maintaining the same or even improved cover. Benefit from our expertise to ease the strain on your finances.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for optimisation.
More useful links
Statista provides a general overview of motor insurance in Germany.
Statista shows statistics on motor insurance companies in Germany since 2000.
GDV provides information on how age affects motor insurance premiums.
GDV provides data on business development in third-party motor insurance.
The insurers allow users to query type classes for motor insurance.
University of St. Gallen offers a report on the future of motor insurance in Germany.
Wikipedia offers a comprehensive article on motor vehicle insurance.
FAQ
What is the difference between the contribution rate and the no-claims bonus class?
The no-claims discount class (SF class) indicates the number of claim-free years you have. Each SF class is assigned a specific premium rate (as a percentage), which is then used to calculate your insurance premium. A higher SF class leads to a lower premium rate.
How does my car's type class affect the premium rate?
The type class assesses the claim risk of your car model. A low type class (few claims, low repair costs for this model) results in a lower base premium, to which your individual premium rate (depending on the no-claims class) is then applied.
Will my contribution rate change if I move?
Your premium rate itself (the percentage of your SF class) does not change directly as a result of a move. However, the regional class of your new place of residence may differ from that of your previous one. A less favourable regional class can increase the base premium, which leads to a higher total premium despite the premium rate remaining the same.
From when do I pay the lowest contribution rate?
You can achieve the lowest premium rate in the highest no-claims bonus classes (e.g. SF 35 or SF 50, depending on the insurer). This requires many years of accident-free driving. The lowest premium rate can be around twenty per cent or even lower.
What does a contribution rate of one hundred percent mean?
A premium rate of one hundred per cent usually means that you pay the full base premium for your insurance, without any no-claims discount. This is often the case for novice drivers in SF class 0 or after several claims.
Can other drivers also affect my contribution rate?
Yes, if other drivers use your car and cause damage, this will be assigned to your policy. This leads to a downgrade in your no-claims class and therefore a higher premium rate for you.
