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Insurance Costs
The cost of car insurance has sky rocketed in recent years. Broadly speaking the cost of a standard policy for a standard driver has doubled in the past decade, an increase that is way in excess of inflation. There is some evidence that as more and more people turn to the internet to obtain insurance cover prices have begun to stabilise somewhat. However, there is no doubting that it is now considerably more expensive to insure yourself to drive than it was a few years ago.
Insurance companies use a broad range of criteria to price car insurance policies. Different companies use slightly different formulae though the most important are those listed below:
Type of car: basically the more expensive your car is the more expensive your insurance policy will be. The industry norm is to grade cars into 20 bands according to engine size, though there are certain exceptions. In simple terms an old banger will rank low on this scale whereas the latest sports car will rank very highly in terms of insurance cost
Who you are: we may live in the age of political correctness, but insurance companies are blatantly sexist and ageist. In terms of keeping the cost of your car insurance down it pays to be middle aged and female. It does not pay to be young and male. If you are a man below the age of 25 you will pay through the nose to insure your car - no matter how old and tatty it is. If you are a young guy intent on impressing the fair sex with your state of the art sports car it is as well to have a trust fund. It will cost you an arm and a leg
History: if you have any motoring offences to your name or have been involved in any accidents in the past you will also find the cost of your policy goes up sharply
Where you and your car are: where you live has a huge impact on the cost of your insurance. Those in towns and cities pay more than those living in villages or the countryside. And whether or not you park your car on the road also has a bearing on the cost of your insurance policy. The chances of having your car stolen are much lower if it is parked in a garage. Equally the chances of third party damage (eg the side of your vehicle being clipped by a passing car) are much higher if you leave the car on the road overnight. For obvious reasons insurance companies take these factors into consideration when pricing their policies
So, in a nutshell, it's simple. If you want cheap car insurance you need to: There are, of course, various ways of reducing the premium you pay to insure your car.
No claims bonus: once you have had insurance cover for a year you should be entitled to a discount on your policy. This is known as a 'no claims bonus' or 'no claims discount'. Typically a one year no claims record would entitle you to a discount of around 25-30% and this rises to 60% or even 65% after four years.
If you do make a claim you do not necessarily loose your entire no claims discount. Typically you might lose say two years worth. There are also ways of insuring your no claims bonus - see 'Protected Discount Policies' on our 'Types of car insurance policy' page.
Excess: as with most other types of insurance, car insurance policies usually contain what is known as a voluntary excess provision. This is the amount you have to pay (say £100) towards any claim before the insurance company will make a contribution. One way of reducing your premium is to raise the amount of the voluntary excess
Pay yourself: if your car sustains minor damage it is worth considering seriously whether to pay for the repairs yourself. This may sound counter to the whole idea of taking out insurance. And in many ways it is. However, quite often a claim on a car insurance policy will result in the next years premium being increased by more than the amount of the claim. So before you make a claim ask your insurance company how much they intend to increase your premium by the following year. And if they won't tell you - and they are usually reluctant to do so - go on asking the question until they do.
Limit the number of additional drivers: finally you might also wish to consider limiting the number of additional drivers (particularly young drivers) who are insured to drive your car.This may not always be practical of course. But if there is any chance of getting your ex wife or husband to include your darling children on their insurance policy and not yours this will save you quite a lot of money
The one thing you should not do under any circumstances, is give incorrect information to the insurance company in order to try to reduce your premium. If you do so you may find this invalidates the entire policy.
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