Car Insurance Guide

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Car insurance premiums may seem to be quite high, but don't think that you go without cover. The government has recently introduced continuous insurance enforcement regulations to crack down on uninsured motorists. The rules make it compulsory to take out insurance if you own a car, even if it sits in the garage for six months of the year. The only exceptions are cars that have been declared off the road and have a Statutory Off Road Notification (SORN), available from the DVLA.

The penalties for driving without insurance can be high. Car owners caught without cover must pay a fixed penalty of £100. Police also have the authority to clamp, impound, or destroy the vehicle. Serial offenders could end up in court with a maximum fine of £1,000.

If you have to buy car insurance, it makes sense to learn about the different types of cover available and the different premiums. You can then find the right policy for your car - at the right price.

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Why is car insurance so expensive?

There are a number of reasons why car insurance premiums are so high - and one of them is uninsured drivers. There are about one million uninsured motorists on Britain's roads and they cost the industry an estimated £500m a year. The cost is passed onto the customer and adds an average £30 to the price of a car insurance policy, according to the Motor Insurers' Bureau.

Personal injury claims are another significant problem with Whiplash claims being particularly common - and difficult to verify - leading many insurers to suspect fraud. Simon Douglas, director of AA Insurance, recently pointed out that the number of injury claims is rising while the number of accidents on the road is falling - a situation that is “plain wrong”.

The government last year announced plans to ban so-called referral fees, which should help to address the problem and bring down premiums. These are fees that are paid to groups or individuals that provide details of accidents to personal injury lawyers.

The Office of Fair Trading and the Transport Select Committee are also both investigating motor insurance costs. In the meantime, there is little let-up for law abiding car owners.

How are car insurance quotes calculated?

Insurance is all about risk - and the riskier the motorist, the higher the premium. Insurance companies take a number of factors into account when they assess risk and issue a quote. Your gender is important as women are statistically better drivers than men because they are involved in fewer accidents and make fewer claims. Women consequently generally get cheaper car insurance quotes than men.

However, this won't last for long. A recent ruling by the European Court of Justice has banned insurers from taking gender into account when setting premiums. The ruling comes into effect in December and the cost of car cover for women is expected to rise by about 30% as a result. We have taken a more detailed look at this on our womens car insurance page.

Age is another influence on car insurance quotes. A driver between the ages of 50 and 59 will pay almost half the premium of a younger motorist between the ages of 23 and 29. Again, it's all down to statistics. Older drivers tend to be more experienced and are therefore less likely to be involved in accidents than someone who has only recently passed their test. Take advantage of our young driver car insurance hub to find the page and information which is relevant to you.

The insurance company will also find out about your driving record. For example, whether you have any speeding convictions and whether you have previously made any claims. It will also want to know your occupation because some jobs are considered riskier than others. A stunt man might have to pay more for car cover than a tax inspector.

Insurers have access to crime figures, too, as well as historical data from past claims. So your postcode will affect your premium - as will your parking arrangements. If you keep your car in a locked garage when it's not in use, you will pay less for your car insurance than a neighbour who parks on the street.

Then there's the make and model of your car. Insurers rate cars into one of 50 groups, depending on their engine size, performance, and repair costs. Cars in group 1 are cheaper to insure than cars in group 50. So if you are looking to buy a new car it is recommended that you check the vehicle's group rating first on the Thatcham website. Read more about the impact of car insurance groups on our dedicated page.

You should also bear in mind that insurers bump up the premiums if you modify your car. If you want to make any alterations to your car or you are thinking of buying a modified vehicle, read our guide to modified car insurance. Sometimes, even a minor change such as a spoiler can affect your premium.

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Are there different levels of cover?

There are basically three different types of car insurance policy: third party, third party fire and theft and comprehensive.

Third party car insurance is the most basic and is the legal minimum requirement. If you have third party you are covered if for any injury to another person or damage to their property. Third party fire and theft also covers your own vehicle if it is stolen or damaged by fire. Fully comprehensive is the most popular and covers a wide range of risks, above and beyond the legal minimum.

Motorists often automatically assume that third party insurance will be the cheapest option. But it is worth shopping around as you can often buy comprehensive cover for pretty much the same price. The reasons behind this are explained on our car insurance policy types page.

What about optional extras?

Most comprehensive insurance policies come with a range of add-ons. For example, your policy might include a courtesy car if you are involved in an accident and your vehicle is off the road. A courtesy car can be a lifeline if you drive to work or you take your children to school every morning. You might also be offered legal expenses insurance to put towards the cost of legal fees if there is any dispute about an accident. There is also breakdown cover, which is another add-on which motorists often opt to pay a little but more for.

Cover for driving in Europe is a popular add-on, though it is usually limited to a certain number of days and might not provide comprehensive cover abroad. MoneySupermarket is aware that this is not good enough for some customers, and therefore compares dedicated European car insurance policies.

Optional extras can give you peace of mind, but they often come at a price. So it is worth thinking carefully whether you really need all the bells and whistles as you might be able to save money by cutting back on cover.

Will I need specialist cover for my car?

Some mainstream insurers are wary of cars that don't fit the norm. Sports cars and high performance vehicles tend to fall into the specialist category because they are often higher risk and more costly to repair.

If you have a classic or imported car, you might need to contact a specialist firm with the knowledge and expertise to offer a bespoke policy. Owners of classic cars, for example, often want to set an agreed value for their car. If it is written off in an accident, the insurance payout will not then fall way below their expectations. To find out more about classic car insurance visit our dedicated page.
Alternatively, you may also need to seek specialist business car insurance policies if you drive your car for business purposes as standard policies only cover social domestic and personal use.

You should be prepared to pay more for policies cover these types of vehicle, but our specialist car insurance guides include useful tips which could help you save you money.

Will I be able to buy motor insurance if I have any convictions?

Insurers tend to shy away from drivers who have motoring convictions. They will either refuse to quote for cover, or they will load the premium to reflect the greater risk. You are likely to pay a higher price for cover even after just one speeding fine. So watch out for those speed cameras!
If you have any other criminal convictions, you might struggle to arrange insurance and will need to seek specialist help. Our guide to car insurance for convicted drivers gives some tips and advice. Never be tempted to lie about convictions or a criminal past as you will only compound the problem by committing insurance fraud.

Can I insure more than one car on the same policy?

You can often earn a discount if you arrange insurance for multiple vehicles with the same firm. Take advantage of the MoneySupermarket multi car insurance page to compare quotes available through leading providers.

What is excess?

All motor insurance policies come with a compulsory excess, which is the amount you have to pay towards any claim. A typical excess is about £200, though it is sometimes waived for windscreen damage. If you are prepared to pay - and can afford - a higher voluntary excess you might be able to negotiate a lower premium. For further information, visit our excess car insurance page.

What can I buy car insurance?

You can either go direct to the insurance company, use a broker or search a price comparison website. If you arrange cover directly from the insurer, you will not be told whether you could buy similar insurance elsewhere for a lower premium. The insurer will also be reluctant to reveal any shortcomings of the policy. Many people presume it is cheaper to buy direct because it cuts out the middleman. But it is always wise to shop around for cheap car insurance quotes.

A car insurance broker searches the market for a suitable policy, so should be able to find you a good deal. However, the search might not be very wide as many brokers contact only a select panel of insurers. Of course, a broker's expertise can be invaluable, but it is still a good idea to seek quotes from a number of different sources.

A price comparison website can find quotes from hundreds of different insurers, including specialist firms, within minutes. So it can save you time - and money, too.

What questions will I need to answer?

The insurer will want to know a lot of information about you and your car before it can quote a premium - your name, address, age, occupation, make and model of the car, whether you have any convictions or a no claims bonus. If your car is more than three years old, you will also need a valid MOT certificate.

Always be honest and upfront with your answers. If you supply incorrect information or fail to disclose any relevant details, such as modifications to your car, it could invalidate your policy. You could also be guilty of committing insurance fraud.

Do I have to pay for car insurance up front?

A one-off annual payment is the traditional way to buy car insurance. However, some people struggle to afford such a large lump sum; so many firms give you the option to spread the cost over monthly installments. There is, however, a charge for monthly payments so it usually works out more expensive. You also normally have to put down a deposit, though some firms offer no deposit car insurance policies which you can compare with MoneySupermarket.com.

Alternatively, a number of insurers these days offer a sort of pay as you go car insurance. A black box is fitted to your car to monitor your driving habits. You then essentially pay for the miles your drive, often earning rewards if you avoid driving in the dark and at rush hour, when accidents are more likely.

There is also no real point paying for insurance that you simply don't need - and some people don't need year-round cover. For example, you might want to insure a friend or relative to drive your car temporarily. It is possible to buy short term car insurance, but just watch out that you don't fall foul of the rules on continuous insurance enforcement. Our page on temporary car insurance tells you more.

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How can I find cheap car insurance?

There are a number of things that can be done get cheaper car insurance, with one of the most effective being the accumulation of no claims discount. Insurers reward drivers who do not make a claim with a discount on their premiums. And if you can manage five consecutive years of no claims, you could knock as much as 75% off the cost of cover.

A no claims discount is obviously precious, so you can also pay an extra premium to protect the discount. You are then normally allowed to make a limited number of claims within a set time period. There is more information on our no claims discounts car insurance page.

Insurers also tend to reward drivers who take additional qualifications such as the Driving Standards Agency's Pass Plus course. You have to pay to sit the course, but the reduction in premium normally outweighs the cost. Read more about this on our pass plus insurance page.

The security of your vehicle is important to insurers. As well as keeping your car in a locked garage overnight, think about fitting approved security devices such as an immobiliser or a car alarm. If you can reduce the risk of theft, you should also be able to reduce your premium.

Most insurers offer a discount if you agree to drive a limited number of miles as they calculate that you are then less likely to have an accident and make a claim. Just make sure that you set a realistic allowance and that you inform the insurer if you are likely to breach the limit. Otherwise, your policy could be invalid.

Young drivers can often bring down premiums by adding an older more experienced motorist to their policy, perhaps their mum or dad. The insurer will assume that the additional named driver will share the car and so lower the risk of a claim. But don't be tempted to put an additional driver as the main driver, a tactic known as fronting. It might lower the premium to name your mum as the main driver of your car, but it is also illegal. You have been warned!

Of course, one of the quickest and easiest ways to get cheap car insurance is to compare prices on MoneySupermarket's free, independent website. There are details of thousands of policies from hundreds of insurers, so you should be able to find a policy that suits you and your car. Don't forget to compare prices at renewal, too. Loyalty rarely pays so you should shop around for quotes to see if you can beat the offer from your existing insurer. There are more helpful hints on our car insurance money saving tips page.

If you have any questions which have not already been answered, why not visit our car insurance forum? Someone out there might have the answer and you can swap hints and advice.

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