Even we can't make this dirt cheap
First read the main Cheapest Car Insurance article
Comprehensive or Third party? What to choose
There are three types of insurance to choose from and you should consider all the options to get the right type. Also, once you've chosen make sure you check your policy carefully, so you know exactly what you are and aren't covered for in the event of a claim.
The minimum level of cover you need to legally be able to drive on the roads is called 'Third Party'. It used to be the cheapest type of insurance but now bizarrely fully comprehensive policies can often be cheaper. Never assuem one costs less than the other; quote both.
Third Party covers you for any damage you cause to another person's vehicle and protection for any passengers in your car.
Therefore, if you are in an accident and it is your fault, you will have to pay for any repairs to your own car yourself, as your insurance won't cover it. It's more expensive because it's assumed you care less about your car and are therefore more likely to have an accident.
Itís generally the most suitable for thoseÖ
- With cars worth less than £1000
- Aged under 25
- Without a no-claims bonus
- Or living in a high risk area
Third Party Fire and Theft
Third party fire and theft has the same level of cover as third party insurance. However, self evidently, it also has the additional cover of assistance if your car is stolen or is set on fire.
This is the widest level of cover but can be the cheapest. The big advantage is if you have an accident and it was your fault you will be able to claim the cost of repairing your own car, and cover personal injury costs, as well as those of the other drivers.
The cover also includes accidental damage and vandalism, for example if somebody causes damage to your car when it is parked in the street and they then drive off. Plus you'll usually (though not always, so do check your policy details carefully) be able to drive other people's cars if you have their permission, although this is likely to be only be Third Party. Sometimes you'll be covered for driving hire cars too.
Fully Comp is a good idea if your car is worth more than £1,500 and gets more important the more valuable you car is. Many insurers will only offer fully comprehensive cover for higher value cars anyway.
There are a few ways of cutting the cost of fully-comprehensive cover, Tesco Value insurance offers a comprehensive policy but limits the repairs to garages it has relationships with, which lowers the cost. However this doesnít automatically make it cheapest, ensure you first use the comparison sites in the Cheapest Car Insurance article to check.
Donít think third partyís cheaper than comprehensive
Counter logically lesser third-party policies often cost more than fully-comp.
Why? Car insurance rates are set by actuaries, whoís job is to calculate risk. And itís likely third-party buyers are on average a higher-risk group, perhaps as overall they care less about their cars, and so prices are pushed up. To illustrate this in one low risk driver quote, we found £290 for fully-comp compared to £406 third-party.
Yet this isnít a hard rule, third-party can win, but for priceís sake always check comprehensive out too, use the main Cheap Car Insurance guide to compare.
Reduce your risk, reduce your cost
Every application for car insurance is different. Each insurerís price depend on two things, first the underwriters assessment of your particular risk focus and then the pricing model which dictates what type of customers the insurer wants to attract.
Therefore by reducing an insurerís perception of your risk you can reduce the price youíll pay. There are of course many factors you either canít change or canít change easily Ö age, gender, where you live and driving history. Yet there are things you can have control over:
- Park and drive carefully
Theft and accidental damage add a bulk to insurance costs. If you leave your car in a garage or driveway itís a big deterrent to theft and means accidental damage is less likely, resulting in a 3% - 7% drop in insurance costs.
And of course the more points on your licence the higher the cost. While speeding points remain on your licence for four years insurers check for convictions during the last five before they are removed from your record.
One speeding conviction may only affect the price of cover by around 5% but any moreíll bump up the price, with two offences costing around 20% more. Being caught with a mobile phone is more serious and can double your quote!
- Add a second person to an under-25s / high risk drivers insurance
Insuring someone aged under 25 can cost a fortune. Yet by adding a second driver with a good record to the insurance, even if they won't use the car often, it can smooth out the average risk and sometimes reduce the premium. It won't always work, but itís worth playing with quotes to check.
However at no point should you add your name as the main driver on a younger driverís policy instead of them. This is known in the industry as fronting and is fraud. When you come to claim, this will often be checked out and your insurance will be invalidated.
- Pick a car
The combination of car, engine size and value all impact car insurance cost. Itís worth considering this when you buy; a big super-powerful 4 by 4 for a 17 year old would cost enough to make Bill Gates balk.
- Fit a security device
Any extra security will help, fitting an alarm or immobilizer (especially one approved by Thatcham) will reduce the bill substantially.
- Donít modify your car
The more changes you make to your car, barring security ones, the more youíll be charged. Always make sure you inform your insurer of any modifications to your car, whether you made them or not, or it may invalidate your policy. A modification is anything that is not part of the standard vehicle specification including factory fitted optional extras, such as alloy wheels.
- Reduce your mileage
The less you drive, the cheaper your insurance will be. Where possible try and reduce your mileage. This may sound trite, but actually the real key is incorporating the extra insurance cost when you make long journeys not just the cost of petrol compared to taking the bus or train (also read Cheap Trains article). If you drive your vehicle on business, always declare this rather than just include the business miles as personal, or the policy may be void.
- Inform your insurer of any changes in circumstances
This is crucial as it reduces potential problems in the event of a claim; even if itís just your address. Trying to get insurance after you've had a policy cancelled due to a fraudulent claim is very difficult, very expensive and will follow you for the rest of your life.
A change in circumstances includes moving jobs, as insurers beleive this can affect your risk. Scandalously, the unemployed often (though not always) pay higher rates for their car insurance, so do inform your provider if you're out of work but also check to see if itís worth cancelling and moving elsewhere, as you donít need to be at renewal to change insurer.
If youíve read these tips and thought, ďitís be quite easy to lie about thisĒ, then of course youíre right. Yet lying on your insurance form is fraud. It can lead to your insurance being invalidated and in the worst case a criminal prosecution for driving without insurance. Donít do it.
Tips and tricks for lowering car insurance costs
If youíre trying to finesse the lowest price, there are a few more things to watch out for. Car insurance marketing is clever. Its aim is to make you feel youíre getting the best deal but to maximise the insurerís profit at the same time.
- Get a Ďnewí quote from your existing insurer
Often applying to your existing insurer as a new customer produces a cheaper price than its renewal quote. Insurers put out more competitive prices to attract new customers so simply start again and you could be better off.
- Consider how much youíd really claim for?
It's worth considering going for a policy with a higher excess (the amount of any claim you need to pay yourself). Many people will find that claiming for less than £500 worth of damage both increases the future cost of insurance and can invalidate no-claims bonuses, meaning itís not always worth making a claim.
So why pay extra for a lower excess? A few policies will substantially reduce premiums for a £1,000 excess, so try this when getting quotes. Of course the one downside with this is if you have a bigger claim youíll have to shell out more, but often itís a good balance of the risks.
- Drive someone elseís car on your insurance
If you have fully comprehensive insurance then often, although not always, it includes whatís called Ďdriving other carsí cover. This provides you with Third Party cover whilst reducing your mileage and therefore the cost of your own policy.
- New car, free insurance
Buy a new car and it may include free insurance for a few years. While this is only worth a few hundred a year to an experienced driver, to a young car owner it could be worth thousands and is well worth taking into account when you add up overall costs.
- New Driver? Take an additional driving course
PassPlus is a Driving Standards Agency course aimed at helping new drivers (within 12 months of passing their test) become more confident on the road. There are six modules; town driving, all-weather driving, driving out of town, night driving, driving on dual carriageways and driving on motorways.
The cost of the course is around £200 but varies depending on where you live and the instructor or driving school you choose. Yet many local councils offer discounts of up to 50%, usually for those under 25, and in Wales it only costs £20 (check if your council is taking part).
Once you have the certificate some insurers then discount the price of your insurance but but as there are not many thereís a high chance you can get cheaper cover elsewhere.
Extra tips for no claimers
- No-claims discounts don't necessarily reduce the premium
For every year you don't claim on the insurance policy you get a discount. This makes a substantial difference to the overall cost. If you do claim it's usually two years off this discount. This is deliberate to encourage people not to claim. You can also get a protected no-claims discount so that claims don't impact it.
Remember though, if you do have an accident, even if you don't claim to keep your no claims discount, the price of the policy can rise simply because you may be assessed as a higher risk in the future.
- Try to keep your no-claims if switching from a company car to a private car
If you have a no-claims bonus from driving a company car and try to find private insurance online, you'll find neither insurer nor broker will allow your previous no-claims bonus to count.
Yet if you phone up most companies will give some form of Ďintroductory or special bonus' to those switching to a private car. This is because these discounts are often applied manually as the online systems don't automatically allow a discount. There are also discounts available with brokers and some insurers where second cars for existing policyholders can attract introductory bonuses, but again these are call-centre not internet-based. See the Mulit Car Discount section in the main Car Insurance guide.
The overall tactic I would suggest is first of all use the Cheapest Car Insurance four-step plan to establish your risk factor Ė then call the top three (or possibly five) providers listed and discuss this no-claims company issue.