'My car insurance was hiked by £300/yr when I moved up the road'

Maria Riddle, 46, who lives in a small village near Colchester, contacted the RAC ahead of her house move in November to log a change of address.

Her new property is just along the street from her old one, with only one letter difference in the postcode. In fact, the two homes are so close together that Maria is still parking her car in exactly the same spot.

Maria fully expected to be charged an administration fee to update the address on her policy, but was shocked to be told that her insurance would be hiked from £376/year to £665/year – almost doubling the cost.

She had only switched her car insurance to the RAC a couple of months earlier, after carrying out a full market comparison to make sure she was on the best deal.

MoneySavingExpert.com did some digging on Maria's behalf and found that, as well as the small change in the postcode, part of Maria's eye-watering price hike was actually down to a 'system error' which had triggered the start of a brand new 12-month policy instead of applying a simple update to her current one.

However, Maria's story goes to underline just how baffling car insurance premium pricing can be – and how it pays to give price changes relating to policy amendments a thorough check before accepting them.

See our Cheap Car Insurance guide for more help on getting the best deal.

'My new address is literally just up the street – I had no choice but to cancel the policy'

The situation Maria found herself in was even more incredible given how close the two properties are in proximity, as the image below illustrates:

She told us: "I explained to the RAC that I would be parking my car in exactly the same spot as when I was living at my old address, as it's literally just up the road in the same village. While I was on the call, I could even see the house I was moving to from my living room window.

"The lady on the phone said she agreed the price change was bizarre, but she was unable to do anything about it."

Neither willing or able to pay the RAC's new higher premium, Maria was forced to cancel the policy completely and take out a different one with a new insurer.

But while her new policy is much cheaper than the RAC's new charge of £665/year, it's more expensive than the £376/year it cost for her original policy. And although the insurer agreed to waive its £55 cancellation fee, Maria still had to pay £49 in premium charges to be able to close down the policy.

However, after we contacted the RAC on Maria's behalf, she received a refund of around £85 as well as a goodwill gesture of £50.

What does the RAC say? 

The RAC initially told us that the disparity in Maria's premium was due to the – albeit minor – differences in postcodes between her old and new addresses.

But further investigation revealed that a 'system error' had also played a part, prompting her to be issued with a new 12-month policy rather than an update to her current one.

However, it still raises questions over how two separate car insurance policies can be priced so differently at virtually neighbouring addresses within the same two-month window.

An RAC spokesperson said: "We're sorry Mrs Riddle was disappointed with the revised premium after moving house. Unfortunately, a system error meant her insurer on our panel wasn't contacted to provide a new quote. We sourced a quote from another insurer, but this resulted in a higher price.

"As a gesture of goodwill, we waived her cancellation fee and refunded part of her old policy."

He added that premiums are calculated using a 'range of factors', including the postcode – even if it's just a street away.

How can I check I have the best deal on my car insurance?

As Maria's case demonstrates, car insurance can be a confusing and sometimes illogical business. Here are some tips and tricks to help you bag the cheapest premium:

• Question cancellation fees. Payable if you need to get out of your 12-month policy contract before its official end date, these fees usually cost around £50. If the reason you need to cancel is beyond your control, or you think it's unfair, see if your insurer will waive it.

• Check your renewal price. If you see your policy through to the end, you will usually be sent a renewal quote around 28 days before the next policy payment is due. NEVER automatically accept your renewal quote, and if you don't receive one, get on the phone to your insurer.

• Three to four weeks before your policy expires, use comparison sites to check for the best deals. If you get a better quote than you've had so far, it's likely to be the cheapest you'll get. See our Car Insurance guide for the current order.

  If you are not ready to buy the policy, many insurers will let you 'lock in' a quote once you have it, so you can buy later (assuming nothing changes in your circumstances, eg, you don't get a speeding ticket or have an accident).

• Try counter-logical tricks. It's all about risk averages and 'actuarial' tables, which can lead to bizarre ways to save. Use trial and error to see if comprehensive's cheaper than third party or if you can save by tweaking your job description. Adding extra drivers can cut costs too if they're a lower risk than you. This is especially strong if you're a young driver adding a responsible older driver, but it's worth a try for others too.