How to save money on car insurance

In January 2010, Simon Douglas of the AA warned that with the cost of claims outstripping insurers’ income, car insurance premiums would continue to rise. Figures from the AA show premiums increased by an average of seven per cent in the last three months of 2009 alone; with insurers pointing to the sheer volume of personal injury claims and associated legal fees as the primary reason behind the increase.

As premiums spiral the emphasis has fallen firmly on the individual to ensure they are doing all they can to keep their premiums in check. Here we offer some important tips to help limit your car insurance expenses.

Don’t pay the price for loyalty

Many of us stick loyally with the same insurer year after year perhaps because we’ve had a good claims experience or because the deal was among the cheapest when we initially took it out. However, while there is a lot to be said for being happy with a company’s service, this shouldn’t come at the expense of a good deal.

Typically insurers increase their premiums during every renewal period and this stings those that stay with the same provider. The best deals are traditionally offered to new customers in an effort to attract business and so it’s sensible to shop around every year to see if you could save money. Research organisation Consumer Intelligence published a report in January 2010 highlighting that drivers can reduce premiums by as much as 35 per cent by shopping around.

This needn’t be time consuming either – comparison websites can compare deals from as many as 120 insurance companies with one search. You can start shopping around within 30 days of your renewal date so you have plenty of time to consider the right deal for you.

Choose the right level of cover

It goes without saying that the more cover you take out, the better protected you will be if an accident occurs. However, there’s no point paying for cover you don’t need. For example, why pay for “business use” cover if you only use your car for social purposes and commuting? Similarly, why pay for a courtesy car option if you already have access to a second vehicle?

If you drive a relatively inexpensive vehicle you may even prefer a third party or third party, fire and theft policy to help you save money. While these options won’t protect your own car in the event of an accident they will give you the minimum legal level of cover you need to drive on UK roads and help you save money as you may find the cost of comprehensive car insurance would out-weigh the value of the vehicle itself.

Take advantage of specialist deals

If you are a young driver, a female driver, or aged over 50; or if you drive a classic, imported, modified or sports car then you may benefit from a specialist policy. There are many specialist insurers that offer unique incentives: for female drivers these might include handbag cover and priority breakdown services; for young drivers there may be rapid bonus schemes and Pass Plus discounts; and for drivers of specialist cars there may be agreed valuations and laid-up insurance. The key is to evaluate these policies alongside conventional insurance policies to see which offers the most value for money.

Avoid interest charges

Typically when taking out car insurance you will be able to pay either annually or monthly. Monthly payments can be easier to manage but are often accompanied with interest charges. So if you have the money, consider paying premiums upfront.

Choose the right vehicle

It’s not just the insurance policy you choose that can help lower your premiums – it’s also the car you drive. Generally, older cars with smaller engines are cheaper to insure because they are less likely to be driven at fast speeds and cost less to repair/replace if an accident does occur. It’s also worth showing restraint on modifications and specifications – a car with alloy wheels, privacy glass, and a sports specification will typically face higher premiums.

The importance of good driving

If you have a history of being involved in accidents or you have driving convictions on your record then chances are your premiums will be higher. Driving safely, such as keeping a safe distance between you and the car in front and sticking to speed limits can pay off as most providers offer no-claims discounts which could reduce premiums by as much as 60 per cent if you go four or more years without making a claim.

Know how to limit your risk

Remember that insurers base premiums on the likelihood of you making a claim and consider: your personal circumstances; your address; the vehicle you drive; your annual mileage; and your driving history. Taking steps to limit this risk can lower premiums – here are some quick-fire tips:

- Agree to a higher voluntary excess: The excess is your contribution towards a claim so by increasing the voluntary excess you’ll be paying more if a claim occurs. However, agreeing to a higher excess can also lower premiums so consider what you can comfortably afford.

- Agree to a mileage limit: The fewer miles you drive, the less risk you pose – so if you don’t use your car too often, agree to a mileage cap.

- Improve your driving skills: You may be able to save money by undertaking an advanced driving course such as the Pass Plus or the Institute of Advanced Motorists.

- Increase security: You can limit the risk of theft by fitting an insurer-approved alarm, immobiliser or tracking device. Parking in a locked garage overnight is also beneficial.

- Limit named drivers: Typically the more drivers on your policy, the higher premiums will usually be. Teenagers or motorists with poor driving records will have a particularly large impact on your insurance costs