How to get the best car insurance deal
Car insurance is almost certainly the financial product most commonly held by consumers in the UK, with the possible exception of a bank or savings account. This is hardly surprising: if you drive a vehicle, insurance is compulsory.
In theory, this ought to make everyone a car insurance expert, able to get the best deal on their motor cover.
Yet too many of us tend to stick with the same insurer for too long and end up paying hundreds of pounds more a year than we need to. We only change policies when premiums become very noticeably too dear.
Conversely, we pat ourselves on the back because we have found ultra-cheap car insurance – only to discover that when we make a claim, certain items were never covered under the terms of that policy.
Shopping around is the starting point for anyone who wants the best car insurance deal. Our car insurance comparison tool allows you to search for and compare quotes from more than 60 top insurers and brokers in the UK.
But knowing how motor insurance works can help you get an even better deal – not just on price but in terms of the service you may need from your insurer. This guide is designed to help you achieve that.
It tries to answer some of the most typical concerns of motorists: everything from explaining how your quote is set and tips on how to cut the cost of your cover, to the various steps involved in making a claim.
We also offer a jargon-buster – explaining some of the more typical terms used when taking out car insurance.
Of course, no guide can ever attempt to answer every query. If you have any further questions, feel free to visit the Car Insurance or Motoring sections in our Forums, where one of our experts – or even other forum members – will do their best to help.
What kind of motor insurance do you need?
When you take out a car insurance policy, you will be offered a choice of three main levels of cover.
Third party: the minimum type of motor insurance you can take out is “third party”. This covers liability for:
* Injuries to other people, including passengers
* Damage to other people`s property
* Passengers for accidents caused by them
* Arising from the use of caravan or trailer while attached to the car.
TIP: Third party cover is OK for people who cannot afford a better type of car insurance.
It may make sense if you are driving an old banger where almost any repair would cost more than the car is worth, or where its replacement might only cost a couple of hundred pounds at most.
But if your car costs more to replace, you need to consider something better.
Third party, fire and theft: the next step up is “third party, fire and theft”, sometimes written as TPFT. This provides the above cover, plus fire or theft of the vehicle. If you are at fault in the event of an accident, TPFT will not pay for repairs to your car.
TIP: TPFT cover is useful for those whose car is not worth much – but would still cost more to replace than the cost of excesses. It can also be useful for younger drivers who might find fully comprehensive policies very costly, those who only drive occasionally or have minimal no-claims bonuses.
But it is generally unsuitable for regular drivers, or those with expensive cars.
Fully comprehensive: this is the most complete form of car insurance and protects against the above, plus:
* Accidental damage to your car
* Personal accident benefit
* Medical expenses
* Loss of or damage to personal effects in the car
TIP: Not all “fully comp” insurance is the same. Although all insurers will cover off the basics, many will offer additional variants on their policies, such as courtesy cars in the event of theft, breakdown or accident, or protected no-claims bonuses.
You may also want free cover for driving in Europe and, in some cases, legal aid when the accident is not your fault. These benefits may incur an extra cost.
What drives the cost of car insurance
People often grumble about rising car insurance costs. Why do prices go up?
Clearly, there are many factors that influence the quote you will be given. Some are personal to you and will be discussed in another section of this guide.
Others depend on the level of benefits you want from your motor insurance policy. Details of these – which you can pick and choose between and thereby influence the price you pay – are also detailed elsewhere.
But there are factors that you have little or no control over and depend on outside circumstances.
Here are some factors that influence how much you pay for your motor insurance.
1) The soaring cost of litigation: drivers are more likely nowadays to claim for personal injury, like a serious case of whiplash, and the amounts paid out for injuries are much higher than they used to be.
Insurers have attempted to intervene to control these costs. But courts that find in favour of claimants still make very significant awards in cases of serious injury or death. And from the point of view of claimants, this is a positive thing.
2) NHS costs: accident and emergency departments can now claim for cost of treatment from the insurance company. This includes ambulance costs.
If you are the blameless victim of an accident, the bill will be paid by the opposite party’s insurer. Conversely, if you are to blame, your insurer will have to pick up the tab. NHS bills can, perhaps surprisingly, be very expensive.
3) Uninsured drivers: official statistics say that one in 20 drivers is uninsured. But recent research carried out by pollsters Mori suggests that this figure is more like one in 10 drivers, albeit that the uninsured period in many cases may run to just a few days or a few weeks.
This is cold comfort to someone who is involved in an accident with an uninsured driver. This adds around £30 to the average annual premium.
Ironically, this can produce a Catch-22 situation: as premiums get higher it becomes even more tempting for some people not to take out car insurance.
4) Stock markets: few people realise that insurers try to “stockpile” funds so that they can pay out in the case of claims. This means money taken in premiums is often invested until it is then paid out.
This strategy is more obvious in the case of home insurance, where storms can lead to very large – and sudden – claims. But to a lesser extent it also applies in the case of motor insurance policies.
Inevitably, this is not much use if markets are plummeting. Again, the recovery in world stock markets since 2003 is what has helped keep premiums at “reasonable” levels.
Thursday, March 19, 2009
Car insurance - don't pay more than you need
We're coming up to one of the busiest times of the year for buying car insurance. However, most drivers will fail to shop around for cover and as a result, will end up paying over the odds. Motorists can make an average saving of £152 a year by taking the time to shop around and compare premiums.
Minimising the cost of your renewal is not as difficult as you think and with our tips below you can quickly be driving a hard bargain.
Don't get caught in the renewal 'jam'
Put the brakes on automatic renewal. It's easy to understand why so many drivers stick with their current insurer when their policy comes up for renewal - it's quick and convenient. And an increasing number of insurers are renewing policies automatically, so rather than you contacting your provider to confirm you want to renew the policy for another year, it will be done automatically unless you get in touch to say otherwise.
This is something to watch out for - even if your insurer offered the most competitive quote last year, it's renewal offer is unlikely to be the best. Insurers tend to offer their most competitive prices to new customers as they want to attract new business. This comes at the expense of existing policyholders.
When it comes to insurance, shopping around should be a must every year. Otherwise you are likely to end up paying way more than you need for your car insurance. And comparing prices is easy - by using our comparison tool - you can compare quotes from more than 80 direct insurers and brokers.
Pay annually rather than monthly
Many insurers charge interest - often in excess of 20% - if you opt to pay monthly. Instead, if you have the cash to spare, cut out interest charges by paying your premiums upfront.
Make security a priority
Unsurprisingly, the higher the perceived risk of theft or vandalism, the higher the insurance premium. Where you live and the type of car you drive are both big factors, but there are ways to reduce your premium even if you're classed as high risk.
By buying a car with an alarm fitted or having one fitted you can see your premium drop dramatically. Likewise, immobilisers and trackers also keep your premium down. Opt for a well-known brand such as Thatchams which is widely recognised by insurers.
Keep your vehicle parked preferably in a garage if you have one - you could slash 5-10% off your premium. If you don't have a garage, park off road and outside your own property, at night.
Flashy cars may look great but they cost
Think before you buy a new car. That swanky sports car may look rather nice but before you commit to buying it, investigate how much the insurance will be - you could be in for a shock. However, by opting for a model with a smaller engine or by going for a slightly older vehicle, the car of your dreams could still be yours.
Still determined to keep that sports car? Consider specialist insurers
If you drive a car that is deemed "high risk", such as a high-performance car, you could be better off comparing policies from specialist car insurers. Many insurers will offer unique policy options such as agreed valuations and offer cheaper cover. However, never assume that specialists are always the cheapest - make sure you shop around first and compare the best price.
Go 'green'
Not only are you helping the environment but you'll be boosting your savings too when you opt for a low emission motor. Insurers often offer extra discounts if you drive a more environmentally-friendly car.
Do you really need those extras?
One of the ways insurance companies make money is by encouraging motorists to opt for unnecessary extras. Don't take out comprehensive cover if your car isn't worth very much - it is simply not worth it. Opt for third party only or third party fire and theft policy and see the price reduce dramatically.
Courtesy cars are also another addition you may not need. Being insured temporarily on a friend or relative's car may be more cost efficient should you be unlucky enough to have your car stolen or damaged.
Agree to a higher voluntary excess
The more you're willing to cover in the event of an accident, the lower your premiums will be. However, don't go overboard - only set the excess at a level you could comfortably afford. Remember, if you do need to make a claim you will have to pay that amount and it could prove a false economy - opting for a £500 voluntary excess is unlikely to knock £500 off your premium.
Split the difference by avoiding small claims
Accidents happen but it's not always worth making a claim. Sometimes it can be worth getting an estimate from a repairer you trust before contacting a car insurance company about a minor accident or damage to your car. Many problems might cost little more than the excess to resolve yet a claim would lead to a higher premium next year and it could affect your no-claims discount.
Opt for temporary cover for extra drivers
Limiting the number of additional drivers on your policy will bring your premium down substantially. Insuring teenagers in particular can send your premium rocketing, Instead of having them on a policy all year round you could take out temporary cover as and when they need it.
Mobile phones ... why they're a bad call
Not only are you putting your own and other motorists and pedestrian's lives at risk by using a mobile phone while driving, you risk hiking up your insurance premium too. Its estimated that a third of Brits still use handheld mobile phones while driving despite the fact that this has been illegal since December 2003. Not only does this risk a £60 fine if caught but moneysupermarket.com research has found that it could also those caught using their phone while driving could result in a 50% increase in your premium. Some insurers won't even quote for divers who've been caught using a phone behind the wheel.
So switch the phone off, invest in a hands-free kit, or pull over to a safe stopping place when the phone rings.
Boy racers be warned - safe drivers get the best deals
Points don't always mean prizes - and certainly not in the case of motor insurance. Some insurers companies are willing to overlook a single speeding conviction but two or more will see your premiums rise by 25% on average, with some insurers even pushing up premiums by as much as 74% for repeat offenders. Even better, consider taking an advanced driving test or Pass Plus course for new drivers, if you want to see your premium go down even further as they are looked on favourably by insurers.
Pride yourself on your 'no claims bonus'
Just as you take pride in your car, take pride in your no claims record. Building up a no-claims bonus could potentially save 70% on your car insurance premiums over five years. While some accidents cannot be avoided you can reduce your risk by ensuring the car is well-maintained particularly over the winter months. Check all tyres for condition, pressure and tread depth; ensure lights and indicators are working and clean; examine the anti-freeze strength; and keep windows clean to enhance your vision. Be vigilant on the road, don't tailgate and be aware of other road users.
Why low mileage pays
Finally, if you don't use your car very often agree to a mileage cap. It is a simple but sensible option. According to the AA you could earn a 5-10% discount with a 12,000 cap on annual mileage, with lower caps earning higher discounts.
Minimising the cost of your renewal is not as difficult as you think and with our tips below you can quickly be driving a hard bargain.
Don't get caught in the renewal 'jam'
Put the brakes on automatic renewal. It's easy to understand why so many drivers stick with their current insurer when their policy comes up for renewal - it's quick and convenient. And an increasing number of insurers are renewing policies automatically, so rather than you contacting your provider to confirm you want to renew the policy for another year, it will be done automatically unless you get in touch to say otherwise.
This is something to watch out for - even if your insurer offered the most competitive quote last year, it's renewal offer is unlikely to be the best. Insurers tend to offer their most competitive prices to new customers as they want to attract new business. This comes at the expense of existing policyholders.
When it comes to insurance, shopping around should be a must every year. Otherwise you are likely to end up paying way more than you need for your car insurance. And comparing prices is easy - by using our comparison tool - you can compare quotes from more than 80 direct insurers and brokers.
Pay annually rather than monthly
Many insurers charge interest - often in excess of 20% - if you opt to pay monthly. Instead, if you have the cash to spare, cut out interest charges by paying your premiums upfront.
Make security a priority
Unsurprisingly, the higher the perceived risk of theft or vandalism, the higher the insurance premium. Where you live and the type of car you drive are both big factors, but there are ways to reduce your premium even if you're classed as high risk.
By buying a car with an alarm fitted or having one fitted you can see your premium drop dramatically. Likewise, immobilisers and trackers also keep your premium down. Opt for a well-known brand such as Thatchams which is widely recognised by insurers.
Keep your vehicle parked preferably in a garage if you have one - you could slash 5-10% off your premium. If you don't have a garage, park off road and outside your own property, at night.
Flashy cars may look great but they cost
Think before you buy a new car. That swanky sports car may look rather nice but before you commit to buying it, investigate how much the insurance will be - you could be in for a shock. However, by opting for a model with a smaller engine or by going for a slightly older vehicle, the car of your dreams could still be yours.
Still determined to keep that sports car? Consider specialist insurers
If you drive a car that is deemed "high risk", such as a high-performance car, you could be better off comparing policies from specialist car insurers. Many insurers will offer unique policy options such as agreed valuations and offer cheaper cover. However, never assume that specialists are always the cheapest - make sure you shop around first and compare the best price.
Go 'green'
Not only are you helping the environment but you'll be boosting your savings too when you opt for a low emission motor. Insurers often offer extra discounts if you drive a more environmentally-friendly car.
Do you really need those extras?
One of the ways insurance companies make money is by encouraging motorists to opt for unnecessary extras. Don't take out comprehensive cover if your car isn't worth very much - it is simply not worth it. Opt for third party only or third party fire and theft policy and see the price reduce dramatically.
Courtesy cars are also another addition you may not need. Being insured temporarily on a friend or relative's car may be more cost efficient should you be unlucky enough to have your car stolen or damaged.
Agree to a higher voluntary excess
The more you're willing to cover in the event of an accident, the lower your premiums will be. However, don't go overboard - only set the excess at a level you could comfortably afford. Remember, if you do need to make a claim you will have to pay that amount and it could prove a false economy - opting for a £500 voluntary excess is unlikely to knock £500 off your premium.
Split the difference by avoiding small claims
Accidents happen but it's not always worth making a claim. Sometimes it can be worth getting an estimate from a repairer you trust before contacting a car insurance company about a minor accident or damage to your car. Many problems might cost little more than the excess to resolve yet a claim would lead to a higher premium next year and it could affect your no-claims discount.
Opt for temporary cover for extra drivers
Limiting the number of additional drivers on your policy will bring your premium down substantially. Insuring teenagers in particular can send your premium rocketing, Instead of having them on a policy all year round you could take out temporary cover as and when they need it.
Mobile phones ... why they're a bad call
Not only are you putting your own and other motorists and pedestrian's lives at risk by using a mobile phone while driving, you risk hiking up your insurance premium too. Its estimated that a third of Brits still use handheld mobile phones while driving despite the fact that this has been illegal since December 2003. Not only does this risk a £60 fine if caught but moneysupermarket.com research has found that it could also those caught using their phone while driving could result in a 50% increase in your premium. Some insurers won't even quote for divers who've been caught using a phone behind the wheel.
So switch the phone off, invest in a hands-free kit, or pull over to a safe stopping place when the phone rings.
Boy racers be warned - safe drivers get the best deals
Points don't always mean prizes - and certainly not in the case of motor insurance. Some insurers companies are willing to overlook a single speeding conviction but two or more will see your premiums rise by 25% on average, with some insurers even pushing up premiums by as much as 74% for repeat offenders. Even better, consider taking an advanced driving test or Pass Plus course for new drivers, if you want to see your premium go down even further as they are looked on favourably by insurers.
Pride yourself on your 'no claims bonus'
Just as you take pride in your car, take pride in your no claims record. Building up a no-claims bonus could potentially save 70% on your car insurance premiums over five years. While some accidents cannot be avoided you can reduce your risk by ensuring the car is well-maintained particularly over the winter months. Check all tyres for condition, pressure and tread depth; ensure lights and indicators are working and clean; examine the anti-freeze strength; and keep windows clean to enhance your vision. Be vigilant on the road, don't tailgate and be aware of other road users.
Why low mileage pays
Finally, if you don't use your car very often agree to a mileage cap. It is a simple but sensible option. According to the AA you could earn a 5-10% discount with a 12,000 cap on annual mileage, with lower caps earning higher discounts.
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