Car Insurance Explained

Why is car insurance so costly?

Uninsured drivers is one reason why car insurance premiums have become so high. There are around a million uninsured motorists on British roads every year which costs the motor insurance industry approximately £500m per annum. The Motor Insurers' Bureau claims that the cost of uninsured drivers is passed to the customer, adding an average £30 to the price of every car insurance policy.

Personal injury claims are another key reason for the high cost of car insurance, with whiplash claims being especially common as well as difficult to verify. This leads numerous insurance companies to suspect fraud in many cases.

AA insurance have gone on record to say that the number of injury claims is increasing, whereas, the number of car accidents is decreasing.

In 2011 the government banned "so-called referral fees" which ought to reduce this problem and lower premiums. Referral fees are sums of money paid to groups or individuals who give accident details to personal injury lawyers.

How do companies calculate car insurance quotes?

Risk is integral to calculating car insurance. The greater the risk the driver presents, the higher the premium. Insurance companies consider various factors when assessing risk and issuing a quote. In the past premiums for women's car insurance was generally lower than men as women are involved in fewer accidents and hence make fewer claims. However this is no longer the case as the European Courts of Justice have issued the the EU gender directive which means that insurance cannot be rated on gender.

Age also affects car insurance quotes. Older drivers aged between 50 and 59 are going to pay nearly half the premium of younger motorists aged between 23 and 29. This is due to the fact that older drivers are likely to be more experienced, hence, less likely to become involved in accidents than those individuals who have passed their driving test recently.

Your driving record also affects your car insurance quote; for example, whether or not you have any speeding convictions and prior claims. The insurer is going to want to know your occupation as certain jobs present a higher risk than others. For example, a stunt man may have to fork out more for car insurance than a tax inspector.

Insurers access crime figures and data regarding past claims. Hence, your postcode and parking arrangements impact on your premium. Should your car be kept locked in a garage when not used, your premium will be less than that of a neighbour who parks on the street. The model and make of your car also affect your premium. Cars are rated into one of 50 groups by insurers, dependent on engine size, performance, as well as repair costs. Cars that are in group 1 are cheaper to insure than those in group 50. So do your research prior to making a purchase.

Should you make any changes to your car, you will pay more for your premium.

How many levels of cover are there?

There are essentially three kinds of car insurance policy:

• Third party;
• Third party fire and theft; and
• Comprehensive.

The most basic kind of cover is third party car insurance is the most basic type and is the legal minimum requirement. If you have third party cover you are insured against injury to another person or damage to their property. Should your vehicle be stolen or damaged by fire, third party fire and theft covers your own vehicle. The most popular cover is fully comprehensive which covers numerous risks, above and beyond the legal minimum.

Motorists usually assume that third party insurance is the cheapest option. However, it is worthwhile shopping around as you can often purchase comprehensive cover for more or less the same price.

Should you take out optional extras?

The majority of comprehensive insurance policies have various add-ons; for example, a policy can include a courtesy car should you be involved in an accident and your car is off the road. Moreover, you may also be offered legal expenses insurance to contribute towards the cost of legal fees should there be any dispute about an accident. You can also pay for breakdown cover, which is a further add-on which motorists can opt to pay a little bit extra for.

A highly popular add-on is cover for driving in Europe, even though this is usually limited to a specific number of days and may not provide comprehensive cover abroad. Optional extras can provide peace of mind, however, they do cost. Opt for the cover you think is essential for you.

Is it necessary to get specialist cover for my car?

Sports cars and high performance vehicles are usually in the specialist category as they are normally higher risk and cost more to repair.

Should you have a classic or imported car, you may need to get in touch with a specialist firm that has the knowledge and expertise to offer a tailored policy. Classic car owners usually wish to establish an agreed value for their car. Should it be written off in an accident, the insurance pay out is not going to be well below the expected settlement amount.

Furthermore, you may need to get specialist business car insurance policies should you drive your car for business purposes as standard policies just cover social, domestic and personal use of the vehicle.

You ought to be prepared to pay more for policies which cover these types of vehicle.

Can I get motor insurance should I have motoring convictions?

Insurers often keep away from drivers with motoring convictions. They refuse to quote for insurance cover, or they increase the premium to reflect the higher risk. You pay more for motor insurance even after a single speeding fine, so beware of those speed cameras.

Should you have any other criminal convictions, you are may find it difficult to get motor insurance and may need to get specialist help. Do not lie about any motoring convictions or any criminal convictions as you are likely to aggravate the problem by committing insurance fraud.

Is it possible to get more than one car on the same motor policy?

You can normally get a discount should you get arrange insurance for multiple vehicles with the same company.

What does the excess mean on my policy?

Every motor insurance policy has a compulsory excess, which is the amount you must pay towards a claim. This excess is usually around £200; however, this is often waived for windscreen damage. If you can pay a higher excess you can negotiate a lower premium.

Where can I buy car insurance?

You can buy car insurance by directly contacting an insurance company, using a broker or searching on a price comparison website. Should you arrange cover directly from the insurer, you will be unaware of whether or not you could purchase similar insurance elsewhere at a lower price. Many people consider it cheaper to buy car insurance directly from an insurance company, as opposed to shopping around. However, this is not necessarily so. It makes sense to get several quotes and then decide.

Which questions do I need to answer?

The insurer is going to wish to know quite a lot about you and your car prior to providing you with a quote, such as, your name, address, occupation, age, car make and model, whether or not you have any convictions or have a no claims bonus. Should your car be older than three years, you are going to need a valid MOT certificate.

It is advisable to be honest. Should you supply inaccurate information or fail to disclose relevant details, you could invalidate your policy. You may also end up committing insurance fraud.

Do I have to pay a lump sum for car insurance?

A one-off lump sum annual payment has been the traditional way of purchasing car insurance. However, many people find it difficult to afford a substantial lump sum. Therefore, most car insurance companies provide you with the option of spreading the cost over monthly installments. There is a minimal charge involved for monthly payments so this method is slightly more costly. You usually have to put down a deposit; nonetheless there are some companies that do not require a deposit.

As an alternative, you will find that certain insurers offer a kind of pay as you go car insurance whereby a black box is fitted to your car which monitors your driving habits. You then pay for the miles you drive, being rewarded for not driving in the dark and at rush hour, when you are statistically more likely to have an accident.

How do I get cheap car insurance?

There are several ways of getting cheaper car insurance, a highly effective one being the accumulation of no claims discount. Insurers reward drivers who have not made a claim with a discount on their premiums. Should you have made no claim for five consecutive years your cost of cover can be discounted by 75%.

Moreover, you can pay an extra premium to protect this discount. Hereby you are usually permitted to make a set number of claims within a specific time period.

You can also reduce your premium by keeping your car in a locked garage overnight and fitting approved security devices like an immobiliser or a car alarm on your car.

Most insurers provide a discount should you agree to drive a set number of miles. You inform the insurer if you are likely to breach the limit, otherwise, your policy can be invalid.

No Claims Discount

A great way of reducing the cost of car insurance is building up a claims discount (NCD), otherwise known as a no claims bonus.

Save time and money on your car insurance

Should you not have made any claims on your policy for an entire year, you can earn a discount of 20% to 30%. Motorists who stay claim-free for five consecutive years could knock up to 75% off their premium.

Insurers financially reward drivers who do not make claims as they are cheaper to insure.

Even if you have not made a claim on your insurance, your premium can increase at renewal. It is not just your claims history that is taken into account.

How does your Insurer calculate your no claims bonus?

Insurers calculate the no claims discount in various ways. However, it normally builds up every year to a maximum of five years. You can usually anticipate earning a 10% discount after a year of claim free driving; a 20% discount after two years; 30% after three years; 50% after four years and up to 75% after five years.

Certain insurers operate accelerated bonus schemes, which enable you to accumulate a discount more rapidly. So say you could be able to earn a full year's no claims bonus in only 10 months. These schemes are usually offered to young drivers to promote safer driving and reduce premiums.

If I make a claim, do I lose my no claims discount?

If your claim on your policy is after an accident which was not your fault and your insurer is able to recover all its costs from a third party; your no claims discount is not usually affected. Certain insurers disregard claims, say for a windscreen or broken window.

Can I move my no claims discount across to another insurer?

It is advisable to shop around when your car insurance with an existing insurer comes up from renewal as you are highly likely to get a cheaper deal from another insurer.

You can usually move your no claims bonus across to another insurer, although you may need to provide written proof of your clean driving record.

Can I move my NCD over to another individual or another car?

The no claims discount normally applies to the main policyholder and for a car. Therefore, you are not usually able to share the NCD between two cars nor transfer it to another individual.

Can I get no claims discount protection?

The most effective way to safeguard your no claims bonus is to not make any claims. However, at times a claim is unavoidable and you may forfeit your NCD due to no fault of your own. Say if an uninsured driver causes an accident, your insurer may not be able to recoup all of its costs. Hence, you may have to forfeit your valuable discount.

There are many uninsured drivers on the road. Consequently, many people opt to pay an extra premium to protect their bonus. No claims discount protection normally means they can make one or two claims within a specific time period and still retain their discount.

It is financially worthwhile to pay for discount protection, especially when you bear in mind that certain insurers knock two years off your discount should you make a claim in any one year.

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