The Brits are a nation of car lovers - and judging by the increase in the number of cars on the road in recent years, there does not seem to be any sign of that changing in the near future.
A quarter of all homes have at least two cars and every single vehicle used on a public road needs car insurance, which is why there are hundreds of motor insurers vying for your business, making the market highly competitive. In addition, gone are the days when you had to visit or phone a broker to arrange cover. Instead you can research different policies online and play one insurer off against another till you've got the best possible deal for your requirements.
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Third party or comprehensive
The first thing to decide when you are buying motor insurance is what type of cover you want and how much you need. The most basic form of insurance is for third party, fire and theft which is the minimum level of insurance which you are required to hold by law. It covers you, as its name suggests, for damage or injury to a third party or their vehicle, and loss from fire or theft.
If you require cover for your own vehicle as well, in the event of theft, damage or loss due to these risks, you will require 'comprehensive' insurance.
If your car is not worth a lot of money, there is little point in forking out hundreds of pounds on fully comprehensive insurance.
If your car is valuable, fully comprehensive cover may be advisable.
What situations are you covered for?
Policies vary considerably as to what exactly they cover, such as paying out for a cracked or broken windscreen.
Another feature you may require is ‘new for old’ cover, whereby the insurer will pay out the entire cost of a new car, although in practice this normally only applies to new models (less than 12 months old).
The amount of cover you get on personal belongings may also vary. While most insurers cover personal belongings such as jackets, CDs and shoes, they often pay out a reduced amount.
Also, bear in mind that one third of insurers only cover audio equipment fitted by the manufacturer.
You may also want to see how much personal accident cover is included because some insurers only offer limited cover to individuals who are seriously injured or disabled.
Make sure you know what is covered and to what extent. It may sound like hard work, but there’s no substitute for reading the small print.
What hazards need to be covered?
Insurers set their premiums according to their claims experience and from this they will have extracted data indicating geographical areas, age groups, types of car and drivers’ occupations which result in higher or more frequent claims.
So all these factors will have a bearing on the amount you are quoted.
Young drivers should see whether premiums could be reduced by completing a Pass Plus course.
When buying a new car, check to see if it comes with free insurance which could save you money, especially if you are a young driver.
Make market segmentation work for you
Insurers like to segment the market into different categories such as young drivers, women drivers, older drivers, parents, students and so on.
Certain groups may benefit from their low claims record. Women of all ages, despite all the sexist jokes about them being poor drivers, make fewer claims than men. The same applies to older drivers of both sexes.
Parents are another group that insurers like to segment, with some providing cover for child car seats and other children’s equipment.
Young drivers, particularly the under 25s, are likely to face higher premiums because of the higher level of claims they tend to make, for serious accidents in particular.
That said, some insurers are starting to treat younger drivers on an individual basis, rather than tarring them all with the same brush.
If you are going to be pigeonholed as ‘high risk,’ you may as well make the most of it! See what perks are on offer for your circumstances.
Half of all car insurance is now sold online – which should be good news for the consumer, as lower administration cost should result in cheaper premiums.
Buying online may mean lower admin fees and cheaper premiums.
Make sure the contract you saw online is the same as the one sent to you in the post – wordings and dates may change, so be sure to check carefully.
Get all the details of the cover you require before signing the policy schedule.
What extras can I get?
There are a few extras that some insurers offer to all customers, which are worth looking out for.
Some insurers may include lock replacement as an extra. You may also want to see whether your insurer will add overnight accommodation as an extra cover in case you are involved in an accident or have your car stolen when you are a long way from home.
The same goes for people who regularly drive abroad. If you drive abroad for long periods, you should alert your insurance company to this and see what cover they can provide.
Driving to excess
The amount of each and every claim which you are required to pay yourself is called the ‘excess’ and is designed to prevent people making lots of small claims which are expensive to administer.
So by agreeing to pay a higher excess, insurers will normally offer you a discount off the normal premium to reflect this.
No Claims Discounts
It feels great to build up a massive no claims discount and pay lower premiums. But what if you were to have an accident? All of a sudden you will be hit by a sharp increase in your premiums because of one incident. All that hard work could be lost and you would see your premium shoot up.
However, your no claims discount can be protected for a little extra cash.
Some companies will allow you to maintain your no claim discount, even if you have an accident.
Making a claim
If you need to make a claim, there is normally a hotline you can call to obtain advice and authorisation for repairs to be done. An insurer’s recommended repairers can usually get to work straight away.
With a straightforward claim, an insurer may pay out immediately. But for more expensive or complex claims, it may send an inspector, or hire a third party loss adjuster to handle the claim. If you wish to appoint someone to negotiate on your behalf with your insurance company, you will need to appoint a loss assessor.
You may be offered legal cover which will pay legal bills up to typically £25,000-£50,000 if you became involved in litigation due to a car accident.
By taking this option, a firm of solicitors (usually of your insurance company’s choice) will defend you in personal liability cases (where you have caused injury to someone else or their property, or help you claim compensation for personal injury.
Breakdown insurance may also be on offer (particularly important if you drive abroad), although if you are buying a new car you may receive one year’s free cover anyway.
If you think you might be sued for any motor-related reason, legal cover may be worthwhile.
If you drive a lot, breakdown cover is essential, but check that you don’t have cover already under another product (a number of premier bank accounts and platinum/gold credit cards throw in roadside cover as a free extra).
How to reduce your premiums
There are a number of ways that you can knock pounds off your premiums. Some of these will not cost you a thing, while others will mean a little bit of investment in your vehicle.
- install an alarm
- don’t go over the top with the extras. Stylish features mean higher premiums
- courtesy car in the event that you are unable to use your own. Do you really want or need this? If not, ask for it to be removed and your premium reduced accordingly
- roadside assistance. Check you haven’t got it already with a bank account or credit card.
Check how long the insurer will offer a courtesy car for. If your car is going to be in the garage for a while, will you have a courtesy car throughout that time?
Similarly, if your car is written off, will a courtesy car be available until you get a new one?