It’s likely you’re paying 11% more for car insurance than you were last year - the Association of British Insurers (ABI) recently announced that motorists are paying a record high of £484 on average for their policies, up £48 in the year. So what are some creative ways to reduce to cost of your car insurance? We’ve made a list of the top ten ways to save on your car insurance premiums, to help you keep more of your hard-earned money in your pocket.
1. Three Types Of Policies: Comprehensive, Third Party or Third Party, Fire & Theft
The level of insurance coverage you want will determine the type of cover that is most suitable for you. The three options are: Comprehensive (most coverage), Third Party, Fire and Theft (middle coverage) and Third Party (least coverage). You are legally obligated to have at least third party coverage, which protects against personal injury claims against you that can potentially cost millions of pounds.
Types of Car Insurance
|Types of Car Insurance Cover||What is Typically Covered?|
|Comprehensive||Damage to your car; Repairs or replacement if your car is stolen or set on fire; Other people involved in an accident; Damage to other people’s property|
|Third party, fire and theft||Repairs or replacement if your car is stolen or set on fire; Other people involved in an accident; Damage to other people’s property|
|Third party||Other people involved in an accident; Damage to other people’s property|
You might expect that third party insurance is always the cheapest – but it isn’t always. So while you might try to reduce your premium by choosing a policy with less coverage, always check prices of all three coverage options before you commit. It’s generally safer to have more coverage, and potentially cheaper.
2. Pick a Car with a Low Insurance Group Rating
Car insurance companies set premiums based on a car’s insurance group, which ranges from 1 to 50 with 1 being the least expensive. Cars that fall into lower categories tend to be cheaper to repair or replace in the case of a claim. For instance, a Ford Fiesta (insurance group range 11-13) will cost less to insure than a Range Rover (around group 50) - which makes sense because a Ford Fiesta would also be cheaper to repair or replace in the case of accident or theft.
If you’re very concerned about the annual cost of car insurance, consider driving a car in Insurance Group 1.
New Cars in Insurance Group 1
- Ford Ka Plus
- Nissan Micra Hatchback
- Hyundai i10
- Fiat Panda
- Hyundai i10
- Seat Mii
- Volkswagen Up
- Ka Studio 1.2
- Citroen C1
- Kia Rio
- Skoda Citigo
- Volkswagen Fox
- Vauxhall Corsa
- Chevrolet Spark
3. Get Multiple Quotes – Every Year
When it comes to car insurance, it really pays to shop around. This is because the price of a certain level of coverage can vary drastically across insurers. To give you an idea of the range of prices you might find, we performed a recent price check of the market for a single male, 25 years old with 5 years of driving experience, no NCD and a £250 excess. The quotes we found ranged from £730 to £4,500. A massive difference, and proof why you should check more than one source.
Whether you are buying a new policy or it’s just time to renew your existing insurance, we’d recommend checking the market. You can do this in two ways: via price comparison websites that cover a large portion of the market, plus checking certain car insurers that don’t appear on the price comparison sites:
Price Check Multiple Sites, in no particular order
|Comparison Sites||Insurers Not on Comparison Sites|
4. Install a Black Box Tracker – Pay How You Drive Insurance/Telematics
These insurance policies use GPS trackers installed in your car to measure your driving style and help insurance companies determine if you are a safe, responsible driver. Less risky driving behaviour may be rewarded with lower insurance premiums. This tip can be especially useful for new and/or young drivers, who tend to pay more for insurance because they lack driving history.
5. Increase the Voluntary Excess
By opting to pay a higher voluntary excess, you can reduce your insurance premium. An excess is the contribution you pay towards any insurance claim. You’ll notice two types of "excess" on an insurance policy: compulsory and voluntary. The insurance company will pick and impose a compulsory excess - then you can choose to raise this excess by adding on a voluntary amount. For instance, if you choose a £100 voluntary excess on top of an insurer's £250 compulsory excess, then you will pay £350 towards any claim.
Before deciding on a huge voluntary excess in order to reduce your premium, just be sure that you have enough money tucked away to cover the total excess, in case you need to make a claim.
6. Pay your Insurance Upfront Each Year instead of Monthly
If you have the funds available, you can save money by paying for your insurance in one go, instead of monthly. Most insurance providers will charge a few percentage points extra for spreading the cost out throughout the year with monthly payments. If you don't have the funds today, then paying monthly is probably cheaper than using an existing credit card, since the average credit card interest rate is around 17.9% for those with good credit or 36.3% for those with weak credit scores. Of course, there are 0% interest purchase cards on the market as well, which charge no interest during the intro period, so long as you keep up with your payments and stay under the credit limit.
7. Don’t Automatically Renew Your Insurance Policy
Unfortunately, insurance companies don’t reward loyalty. Those renewing a policy may be charged a higher premium than a new customer for the same policy. When it comes time to renew, check the price of a new policy from your current company – it may be lower than what they’re offering you. If so, ask them to match the lower price. (And remember to price check with other insurance providers, too!)
8. Don’t Use Your Car for Business
You may pay a higher premium if you use your car for business. If you have the option keep your car for personal use only, you may pay less each year to insure your car.
9. Build Up Your No Claims Discount
Those who haven’t made claims on their insurance may be rewarded by the insurance company with a discount, called a No Claims Discount (NCD). This isn’t a quick price fix; in fact, it takes years. While the discount varies by insurer, typically a driver might expect an additional 10% of premium discount per year, up to a maximum NCD of around 50%.
Due to the nature of NCDs, they produce less added value over time. For example, motorists insured by a company offering a 10% reduction per no-claims year, up to a maximum of 50% off, won’t get any additional benefit after the fifth year (5 x 10% = 50%). From the first year until the fifth year their discount would grow by 10% each year, but remain stable from the fifth year on.
There’s one important small print rule you should be aware of when it comes to NCDs. Having an NCD does NOT necessarily mean that the amount you pay will go down next year. NCD is a discount off of your new premium; and your premium may rise in subsequent years. An NCD is just a discount off of this new premium.
10. Don't Pay for Extras
Like a grocery store enticing you with extras like gum, chocolate and magazines in the checkout line, insurance companies will offer you extras as you're completing your quote. Extras might include the use of a courtesy car if your car in indisposed, breakdown cover or protecting your no-claims bonus. Think carefully about whether or not you really need these features, as they will increase the cost of your car insurance.