The Association of British Insurers (ABI) recently announced that motorists are paying £429 a year for car insurance on average. While this figure reflects a downward trend recently—off from a high of £484 two years ago—car insurance remains one of the largest costs of running a car. So what are some creative ways to reduce to cost of your car insurance? Here are ten tips to save on your car insurance premiums, to help you keep more of your hard-earned money in your pocket.
1. Choosing the Right Type of Cover
There are levels of car insurance available in the UK: Comprehensive (most coverage), Third Party, Fire and Theft (middle coverage) and Third Party Only (least coverage). You might expect that third party insurance is the cheapest since it gives the least cover, but that isn't usually the case. In fact, our study on cheap car insurance in the North East found that Third Party Only (TPO) plans cost more than 2X as much as a cheap Comprehensive policy.
So while you might think you can reduce your premium by choosing a policy with less coverage, always check prices of all three coverage options before you commit. Besides getting a potentially cheaper price, a plan with higher coverage will give you more protection.
FYI you are legally obligated to have at least third party coverage, which protects against damage to other people's property and 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|
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—so these cars are cheaper to insure. 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.
|Cheap Cars to Insure UK||Years||Specs||Used Price Range||Used Market Availability (# of cars on AutoTrader)|
|Kia Rio||11-17||1.1 CRDi 1 Air (01/15-) 5d||~£1,850||0-50|
|Volkswagen Polo||17 on||S||~£4,000||0-50|
|Smart Forfour||15-19||Pure 71hp 5d||£6,500||0-50|
|Ford Ka+||16 on||Studio 1.2 Ti-VCT 70PS 5d||£4,300 - £9,000||0-50|
|Chevrolet Spark||10-15||1.0i 5d||n/a||0-50|
|Citroen C1||05-14||1.0i Vibe, 1.0i Airplay||n/a||0-50|
|Fiat Panda||04-11||1.1 Active and 1.1 Active ECO||£9,000 - £11,000||0-50|
|Nissan Micra Hatchback||17 on||Visia 1.0 71PS 5d, Visia IG 71 5d, Visia+ 1.0 71PS 5d, Visia+ IG 71 5d and Acenta (not diesel or turbo)||n/a||0-50|
|Skode Fabia Hatchback||15 on||S 1.0 MPI 75PS 5d, SE 1.0 MPI 60PS 5d and Colour Edition 1.0 MPI 60PS 5d||n/a||0-50|
|Hyundai i10||14 on||1.0 Blue Drive S Air 5d||£3,595 - £6,495||50-100|
|SEAT Mii||12 on||S, Ecomotive and 1.0 SE 3d/5d||£2,475 - £5,000||50-100|
|Vauxhall Corsa Hatchback||06 - 14||1.0i 12V ecoFLEX Expression 3d||£1,600 - £2,700||100+|
|Skoda Citigo||12 on||1.0 MPI S 3d||£1,950 - £4,000||100+|
|Volkswagen Fox||6-12||1.2 litre||£800 - £1,795||100+|
|Volkswagen Up||12 on||1.0 Take Up, Take Up 1.0 BMT 60PS , 1.0 BlueMotion Tech Move Up and Some 1.0 Move Up models||£2,250 - £4,600||100+|
3. Compare Car Insurance Quotes
When it comes to car insurance, it really pays to shop around. This is because the price of cover can vary drastically across insurers. To give you an idea of how much prices can vary from insurer to insurer, 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, which proves 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
Some 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—these are called "black box" or "telematics" policies. Black box car insurance is particularly suited to young drivers, who lack driving history, tend to pay a lot for car insurance and have a hard time finding cheap car insurance.
5. Increase the Voluntary Excess
By opting to pay a higher voluntary excess, you can reduce your insurance premium (but not always by much). The excess is your contribution towards any insurance claim, so before deciding on a big 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.
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 your total excess that you pay towards any claim is £350.
6. Pay your Insurance Upfront Each Year instead of Monthly
Paying annually instead of monthly is probably the simplest way to save money on car insurance—if you have the funds available. Most insurance providers will charge a monthly finance fee for spreading the cost out throughout the year with monthly payments. If you don't have the funds today, then paying monthly could be cheaper than using a credit card, but it will depend on your credit card APR.
7. Don’t Automatically Renew Your Insurance Policy
Unfortunately, insurance companies don’t usually reward loyalty. Those renewing a policy may be charged a higher premium than a new customer for the same policy. So 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—and check the market using a comparison site like our car insurance partner QuoteZone. If you can find cheaper prices, ask your current provider to match the lower price.
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), also referred to as a No Claims Bonus (NCB). This isn’t a quick price fix; a NCD takes years to build up. 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 could 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, sweets 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 is stolen, 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. They are certainly nice to have, but may not fit in everyone's budget.