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Car insurance and how to save
If your knowledge of car insurance is restricted to only knowing the lyrics for the Gocompare.com commercial then it’s time to bring yourself up to speed - and in the process, learn about a host of ways to save.
Why do you need car insurance?
Car insurance is a legal necessity in the UK and is designed to ensure that the costs of any driving related damages and injuries can be covered.
What is included in a policy?
What your policy covers will depend on the individual insurer you are dealing with. Typically, there are three levels of cover:
- Third party only: Covers liability for injuries to others, damage to their property and liability while towing a caravan or trailer.
- Third party, fire and theft: Third party cover; plus cover for your own vehicle against theft, damage from an attempted theft and fire damage.
- Comprehensive: Third party, fire and theft; plus cover for damage to your own vehicle in the event of an accident, subject to policy exclusions. Most comprehensive policies will also include: windscreen cover, personal effects, accidental damage, medical expenses and more.
Typically policy features are either offered as “standard”, meaning they are automatically included in the policy; or as “optional extras” meaning they can be included for an additional premium. Optional extras usually include: courtesy car cover, legal expenses cover and breakdown cover.
What is excluded from a policy?
Most policies will feature key exclusions that are outlined in your policy documents. For example, it is unlikely you will be covered for track races or rally events unless you take out a specialist policy.
Is there anything else to watch out for?
Other key features of a policy to look for are:
- Excess: This is your contribution towards a claim and consists of a ‘compulsory excess’ set by the insurer; and a ‘voluntary excess’, which is an additional amount you agree to pay when you take out the policy in case a claim is ever necessary. Choosing a higher voluntary excess will usually lower premiums but be careful to keep it at a level you can afford.
- No-claims bonus: Most insurers now offer no-claims bonuses as incentives for better driving and avoiding claims – they could be worth as much as 60 per cent off your premiums after four or more years. Crucially, if you make a claim on your policy, even if it is not your fault, it will affect your no-claims bonus unless the insurer is able to recoup its costs from the other driver’s insurance company; or unless you have taken out “no-claims discount protection”, which is an optional extra on some policies.
How are premiums calculated?
Insurers will ask a series of questions when you are searching for a quote – and these are used to determine how high your premiums will be. The factors they look at include:
- The car you drive: Vehicles are split into insurance groups from 1-50 based on the risk they are deemed to pose. Factors taken into account include: repair costs, cost of replacement parts, repair times, security features and performance levels. They will also consider how the vehicle is used – for example, do you just use it for general run-arounds or do you also require it for commuting or business purposes?
- Driving history: Whether or not you have driving offences on your record and whether you have a history of making claims.
- Personal circumstances: This can include everything from whether you are married to your age, occupation and the number of drivers on your policy.
- Address: Such as whether you live in an area with a high rate of vehicle crime or traffic accidents.
- Annual mileage: The more miles you drive, the higher your insurance premiums will be.
How to lower premiums
The key to reducing premiums is to lower the risk you pose, such as by:
- Agreeing to a mileage cap: Some insurers offer reductions for lowering your annual mileage or only driving at certain times of the day.
- Boosting security: Such as by investing in alarms, immobilisers and tracker devices and parking in a locked garage overnight.
- Choosing the right car: Opt for older cars with smaller engines that are classified in lower insurance groups and are not modified.
- Driving safely: Allowing you to build a no-claims discount and avoid convictions.
- Increasing your excess: This raises your contribution towards a potential claim.
- Limiting named drivers: The fewer drivers on your policy, the better.
- Paying premiums annually: This avoids monthly interest charges.
You should also be able to save money by shopping around for car insurance quotes with a comparison website to ensure you’re receiving a competitive deal. |
