The young driver car insurance market explained
By Mark Hooson
The cost of car insurance for young drivers can be eye-wateringly high. They often come in at several thousand pounds and can be more than the purchase price of the car. Little wonder young drivers frequently get extremely frustrated at the prices they are charged for cover.
The main reason why young driver car insurance costs so much - and is so expensive relative to that for older and more experienced drivers - comes down to the number and size of claims made by young drivers. The statistics show that younger drivers are more likely to be involved in an accident than their older counterparts.
What's more, the cost of a claim involving a young person tends to be higher than the cost of a claim involving an older driver. This is because many claims associated with young drivers involve collisions at high speeds when there are several passengers in the car - the combination of damage to the vehicle or vehicles involved and the personal injury costs accounts for the large sums involved.
Costs on top of insurance
Of course, insurance is not the only expense associated with driving. Fuel costs remain painfully high, and there are road tax and garage bills to consider as well. These can be a huge burden for drivers of all ages.
MoneySupermarket has found that two-thirds of drivers have changed their driving habits in a bid to keep costs down, while 5% have been forced to give up driving their car because the costs were too high - so young drivers are clearly not on their own when it comes to experiencing the financial pain of running a car these days.
Reducing the financial burden
With costs so high, any savings are welcome, so here are a number of ideas on how to get cheap car insurance for young drivers:
Car insurance groups
Insurance companies allocate every car registered to drive on UK roads to one of 50 car insurance groups. These take into account the make and model of the car, its performance capabilities, the cost of repairs, in-built security features and how attractive it tends to prove to thieves. Insurers also overlay their statistics about how often particular cars are involved in accidents.
In general terms, the higher the number of the group, the bigger the insurance premiums will be. Other factors will obviously be taken into account, such as the age and location of the driver and his or her driving history, but the car's insurance grouping will be significant in determining the eventual size of the premium.
You are likely to get the cheapest car insurance for young drivers available if you opt for a car from a lower group. For more information on how the car insurance group system works, visit www.thatcham.org
If you have a low annual mileage you should be able to lower your premium relative to someone who drives further each year. The logic is simple: the more miles you drive, the more likely you are to be involved in an accident. But make sure the figures you give to the insurer on your proposal form are accurate because you could invalidate your policy if you breach the agreed annual mileage limit.
Our young driver car insurance comparison tool features a useful calculator to help you work out how many miles you drive each year.
Drive with care
Points on your licence often mean pounds on your premium, so avoid speeding and other transgressions. Racking up points can quickly add 5% or 10% to your young driver insurance costs and, if you are found guilty of a serious offence such as drink-driving you could see an increase of 50% or more. You might even find it difficult to obtain cover at all.
Most policies have a built-in, compulsory excess of £100 or perhaps £200. This is the amount you must pay towards the cost of any claim.
You can also choose to have a voluntary excess at a level chosen by yourself. If return for agreeing to pay more towards the cost of any claim, you will normally be rewarded with cheaper car insurance for young drivers.
It is important to make sure you can afford to pay the combined (compulsory plus voluntary) excess should you have to make a claim. Also be aware that, the higher the combined excess, the higher the amount will be before you can even make a claim on your policy. If your total excess is £400 and you suffer £300 worth of damage in a bump, you'll have to pay the lot yourself.
Claim free driving
Drivers who don't make claims can build up a no-claims discount (NCD). The NCD can be valuable, knocking up to 70% off the cost of car insurance for young drivers after five consecutive claim-free years. Your actual premium might still increase at renewal - you'll simply get the discount off the higher amount. For this reason it is always important to shop around for young driver insurance premiums when your renewal is due rather than automatically sticking with the same insurer.
NCDs are “portable”, which means you can transfer them to the new insurer if you move your policy.
If you build up a substantial NCD, it can often be worth paying for minor repairs yourself rather than making a claim on your policy and losing the discount.
If you pay an additional premium you can protect your discount so that you can make one or perhaps two claims in any 12-month period without jeopardising your NCD entitlement.
Check your cover
There are three types of motor insurance policy: Fully Comprehensive, Third Party, Fire & Theft and Third Party. Third Party car insurance is the most basic and the legal minimum to drive on a UK road. It covers the policyholder for any injury or damage to another person or their property.
Third Party Fire and Theft car insurance
is a step up and includes loss or damage to your car as a result of fire or theft. Fully Comprehensive cover offers the broadest range of cover including damage to your own vehicle if you are involved in an accident.
It can be cheaper to opt for a more basic level of cover. This could be a sensible option for a young driver with a car that isn't worth very much. But you should always compare all policy types, because the cost of comprehensive cover sometimes stacks up well against the more limited third party fire & theft.
Cut out policy extras
Insurers often build in extra services into their comprehensive policies, such as legal expenses insurance, courtesy cars and breakdown cover. If you can manage without these, you should either ask the insurer to strip them out and provide a young driver car insurance quote which reflects the reduced level of cover or look for a policy that doesn't include them from the offset.
Monthly car insurance - good or bad?
With car insurance for young drivers being so expensive, it can be tempting to spread the cost of cover over 12 months rather than pay the whole premium in one go. But remember that many insurers charge more in total if you take the instalment option - so 12 times the monthly payment is higher than the single price.
Motorists who make it tricky for thieves to steal their vehicle often pay less for their car insurance. So fit your car with an approved alarm, immobilizer and tracking device. If you have a more expensive car, the insurer might insist that you install such devices as part of the deal.
It will also help if you can park “off road” overnight, preferably in a locked garage or at least in a driveway.
For more ideas on how to overcome the high cost of car insurance for young drivers, take advantage of our money saving tips page.
Enhance your driving skills
The Driving Standards Agency's Pass Plus course is aimed at newly qualified drivers and covers various aspects of motoring that are not covered by the standard driving test, including night and motorway driving. If you complete the course, you could earn a reduction of up to 35% on the cost of car insurance for young drivers. You can find more details on our pass plus insurance page.
The Institute of Advanced Motorists also runs driving courses to boost driving skills and so reduce the statistical likelihood of an accident.
Add 'named' drivers
You can reduce the cost of young driver car insurance by adding older, more experienced people to your policy as 'named' drivers. This reduces the cost because the insurer assumes that the car will be driven for some of the time by a 'safer' driver.
It is crucial, however, that the person who drives the car the most is listed as the main driver on the policy. Young drivers should never be tempted to seek lower insurance costs by getting a relative to insure a car that they then drive as the main driver. This is known as 'fronting' and counts as fraud.
If the insurer can show that fronting has occurred, it might refuse to pay any claims. Fronting can also lead to prosecution and anyone found guilty or associated with the crime could find it difficult to obtain affordable cover in the future.
For more information on this, visit our named driver car insurance page.
Buy car insurance for young drivers online
It is advised that you shop around for young driver insurance quotes at renewal because insurers do not reward loyalty and do not offer their best prices to their existing customers, so automatically renewing each year is a bad idea. You can compare car insurance for young drivers provided by a wide range of insurance companies on MoneySupermarket's price comparison website. It's quick, easy - and it's free.
Is telematics the solution?
In a bid to bring the cost of car insurance for young drivers down to a more affordable level, some insurance companies are promoting black box insurance - sometimes known as 'telematics insurance' policies.
With this kind of deal, your car is fitted with a device, probably around the size of a pack of playing cards, which records data on your driving style along with details of where and when you drive. You may be sent the device through the post along with simple instructions on how to locate it within your car.
The insurer is primarily interested in how you accelerate, brake and take corners. Also important is the distance you drive along with the roads you use and the times of day and night you travel in your car.
If you emerge from the analysis as a safe driver who avoids motorways and night-time driving, you may see a reduction in your premium after a three- or six-month review. If, however, you accelerate and brake aggressively, break speed limits and use high-risk routes when incidences of accidents are known to be high, your premium could rise.
If you modify your driving behaviour you can improve your risk profile and obtain reduced premiums. The policies incorporate an online 'dashboard' that you can access to see how you are performing against the various parameters. This will give you an indication of areas that might reward attention.
All in all, black box insurance premiums differ from those on a conventional policy in that they are based on the drivers actual behaviours rather than just statistics. Not all young drivers are 'boy racers', so black box insurance is being seen as the ideal way to prove the insurers wrong and benefit from cheaper young driver car insurance quotes.
Age specific guides to car insurance for young drivers
MoneySupermarket is committed to help its customers find the cheapest premiums available to them, given their situation. Age is a very significant factor for insurers when it comes to comes calculating car insurance quotes, and when it comes to young drivers every single year can make a huge difference.
We have therefore completed a number of different young driver car insurance guides, focusing on the cost of premiums for each different age group in order to make sure the advice you receive from us is as relevant as possible:
The gender issue addressed
On the 22nd December 2012, it became illegal for insurance companies to discriminate on the grounds of gender, which should see an end to the age old discrepancy between male and female car insurance premiums.
Although it means that car insurance for young male drivers will be marginally lower than it would have been prior to the regulation change, it does mean that car insurance for young female drivers will be more expensive; possibly by up to 30%.
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†82% of shoppers obtained a quote in 5 minutes or less. Source eDigitalResearch December 2012.