How to cut the cost of car insurance
As any driver will testify, running a car does not come cheap, and motor insurance can cost a fortune - especially if you have claimed or haven't been driving long.
The average cheapest annual premium shot up to £971.40 in 2011 and in the last quarter of the year alone prices increased by 5.4% or £50.
Reasons for the increase
The hike in premiums can be attributed to a number of factors, including the rising cost of settling claims, the year-on-year increase in personal injury claims and a huge rise in fraud.
It's estimated that uninsured drivers represent around one in 20 vehicles on Britain's roads, and, according to the AA, claims involving them could add around £80 to every annual motor insurance policy.
But while the cost of premiums may tempt some less scrupulous drivers to consider going without cover, this is not an option.
Motor insurance is a legal requirement, and driving without valid cover is punishable by a fine of up to £5,000 and up to eight points on your licence. Remember, 12 points and you'll lose your licence.
Drive down costs
Nonetheless, although prices are rising and introductory deals drying up, it's still possible to drive down the cost of insurance if you're prepared to put in a bit of time and effort.
The golden rule with motor insurance is not to automatically accept the renewal quote from your existing insurer without checking if you're getting the best deal. Insurers know most customers will renew their policies year after year, so they don't have to fight to keep your business. There are no rewards for loyalty, and many companies rely on your inertia to increase their profits by loading renewal prices with a hefty premium.
Equally, don't assume that you have to wait until renewal time to get a better deal, because if you haven't claimed on your policy, most insurers will let you cancel with a pro-rata refund.
The key to getting a better deal is all about playing different insurers off against one another, and the best way to do this is to get online and shop around for the best price.
Provided you have information about your car and driving habits to hand, it should only take a few minutes to input your details into a price comparison site. The ones who cover the largest part of the market are:
Even just doing a comparison with one of these sites could easily yield a quote which is a few hundred pounds cheaper.
"Most comparison sites are quite intuitive and easy to use: you simply log on and follow the on-screen instructions," says Nick Dear, spokesperson for insurer More Th>n.
"Some sites will offer a sliding scale to help you see how your excess will affect your premiums, while others will allow you to specify which elements your perfect policy would include - helping you to tailor your policy to your exact needs."
However, it's important to understand the limitations of these sites too, as they don't all cover the same providers. Prices can vary from site to site too, even for the same insurer. So to get the widest possible range of quotes you need to take the time to visit more than one site.
Having done this, you should also contact the firms that only offer cover direct, such as Direct Line and Aviva, to ensure you've really covered the whole market.
"Don't rely on one comparison site to give you the best information," says Steve Burton, group marketing director at Santander Insurance. "There may be a better deal available on a different site – or by going direct."
Once you've compared prices to see if you can find a better deal, try going back to your existing insurer to see if it will reduce the initial cost quoted in a bid to keep your business.
You may be surprised at how often providers can be haggled down to a price you're happy with - meaning you can avoid having to make the switch after all.
What you can do to limit costs
As well as researching the market, there are plenty of other simple steps you can take to cut the cost of your cover. First, keep your car safe: increase security by keeping your car off the road at night in a garage or on a drive, and by fitting an alarm or immobiliser.
- Try to cut your mileage: lower your premiums by limiting your mileage by car pooling, for example, or investing in a bike for shorter journeys. But don't be tempted to lie about your mileage, as this may invalidate your insurance should you need to make a claim.
- If possible, raise your excess. This will lower your premiums, but make sure you could still afford to pay out the higher excess in the case of an accident.
- Consider downsizing your model: vehicles with larger engines and body modifications, such as alloy wheels, are more expensive to insure, so opt for a car with a smaller engine and less racy image.
- Adding a cohabiting partner can also cut costs, and the same applies to young drivers who add a responsible parent with a clean, safe record, but make sure the person named as the main policyholder is the principal driver, as it is fraud to lie about this.
- Also, change the way you pay. Buying online should increase savings as many firms give web discounts, and always opt to pay the whole year upfront, as many insurers charge for paying in monthly instalments.
Cheap isn't always best
While cost is an important consideration when choosing car cover, it's crucial not to make your choice on price alone, as the cheapest quote will not necessarily offer the the best protection. "Aggregator comparison websites can be a good place to start," says Douglas.
"But bear in mind that companies supplying prices to the sites may impose a high excess or strip out benefits that you might find useful, such as windscreen cover or overseas travel, in order to arrive at the cheapest price."
Furthermore, it's absolutely vital the policy will pay out if you do need to claim, so take the time to read the small print to check what is covered, as that should ensure you don't get caught out.
"Check the individual policy wordings in detail so you are absolutely confident you know what is and isn't covered," says Dear. "It's far easier to negotiate with an insurer before you agree to a policy than it is when you are trying to make a claim."
The key is to read the small print. "Shopping around isn't the be all and end all of getting the best value for money," adds Douglas.
"You need to be comfortable the insurance you buy will do what it says on the tin, includes everything you want included, and will still be there when you come to renew your policy."
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.