Cut the cost of car insurance
Car insurance has never been more expensive and is set to jump a further 20% in 2009.
Premiums increased by almost 1% per month throughout last year, according to the AA, with a sharp rise during the fourth quarter as insurers attempted to recoup losses from the higher number of personal injury claims and fraud. The AA reports that the average quoted premium for an annual comprehensive car insurance policy is now £741.66.
Meanwhile, quotes for third party, fire and theft insurance - typically bought by young drivers – has hit the £931.31 mark.
Simon Douglas, director of AA Insurance, says insurance premiums will continue to rise despite historically low interest rates.
"Personal injury claims and their associated legal expenses rose by around 22% last year to about £6.16 billion and are expected to hit £10.9 billion by 2012 - whiplash injury alone represents around £66 for every car insurance policy sold,” he explains.
With fraudulent claims also up 17% in 2008, and the credit crunch hurting insurers as well as banks, some commentators are pencilling in a 20% increase in car insurance premiums over the next 12 months.
Douglas is a little more optimistic, and believes that competitive pressures mean a 12% increase is more realistic.
However, he warns that insurers will become increasingly picky about the drivers they are prepared to insure, reserving the best deals for the motorists with the lowest risk.
“We have seen some insurers pull out of the third party, fire and theft market which is dominated by young drivers. In fact, about half of the UK's insurers won't cover young drivers at all," he adds.
Hayley Parsons, chief executive of Gocompare.com, says motorists who don’t switch their insurance this year will potentially pay a very high price for their misplaced loyalty.
“In the main, insurers don’t reward you for your loyalty – and this year it looks like those people who don’t switch will be subsidising those that do,” she explains. “Not all insurers are increasing premiums and individual providers will judge each particular risk differently.”
Cut your premiums
The type of car you drive, as well as your personal circumstances, will have a bearing on the premium you end up paying.
While your age, gender and driving experience are not factors you can change, there are a few things you can do to potentially slash the price of your policy.
1. Everyday measures
* Keep your car locked up in a garage or even parked in a driveway as this will reduce the risk of vandalism or theft, and make insurance cheaper.
* Invest in an engine immobiliser or car alarm.
* Some experts predict that, in the future, Sat Nav will also reduce premiums.
* Think about the way you drive – insurers may overlook the odd misdemeanour but more than one fixed penalty fine for speeding could see your premiums jump.
* If you've just passed your test or are aged under 25 then your premiums will be higher, as younger drivers are seen as riskier. Taking advanced Pass Plus driving lessons could slash your premiums by as much as 3%.
* If you are in the market for a new car, then remember to check out the insurance group a vehicle is in. Also, bear in mind that fancier cars tend to attract higher premiums because they are more appealing to thieves.
2. Shopping around
* Never let your car insurance policy roll-over from one year to the next without first checking to see if you could get a better deal elsewhere – loyalty rarely pays when it comes to insuring your motor.
* Get a quote from your current insurer and then compare this with the whole market by using one or more comparison websites and contacting insurers such as Direct Line and Norwich Union directly as they don’t use third-party websites.
* Cheaper doesn't mean better - read policy details carefully to make sure you get the cover you need.
* Young and inexperienced drivers tend to be seen as having the highest risk by insurers, especially if they are male. It is worth adding a more experienced driver (such as a parent) onto your insurance, even if they are unlikely to drive the vehicle, as this could significantly reduce the cost.
* Think about the level of excess you want. Experts tend to recommend opting for an excess of £500, because the majority of minor repairs cost less than this. Opting for £500 excess indicates to your insurer that you won’t make a claim for a minor issue – this should mean your premium drops.
* Making a claim will see your premium increase, but insurers typically offer no claims discounts ranging from 30% to 70%. So if you don’t claim on your insurance then you could save some serious cash when it comes to renewal.
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.