TheRateTart Car Insurance Guide
Contents
- Introduction
- How do car insurance companies make money?
- What can I do to reduce my car insurance premiums?
- Tips from TheRateTart
Use TheRateTart guide to car insurance to understand how premiums are calculated and how to pay as little as possible for the level of cover you need.
How do car insurance companies make money?
By picking the risks they insure carefully and by investing your premiums.
Car insurance is really a gamble. You bet your premium (your stake) that you will have a claim. Your insurance company bets that you won't. They need to be right a lot more often than they are wrong. They pick risks carefully, and charge higher premiums for the people they think are a bigger risk.
When they think they've got too many risks which have the same profile (e.g. sports car driving men under 30 living in SE1), they feel like the odds have become tilted against their favour. If this happens they might decline any similar quotes. Or they might start to drive the price up. So, even if you've got a clean license, no points, live in a great area and drive a low risk car, it still pays to shop around.
What can I do to reduce my car insurance premiums?
Shop around and compare quotes from a range of car insurance providers.
It's rare that any two car insurers will offer exactly the same cover on a directly comparable basis. The differences range from the excess amount you have to pay in the event of a claim, to levels of legal cover, to insurance for belongings left in the car. It is, or course, easier for an insurer to create a cheap looking premium by reducing cover than by reducing profit margins.
The most effective way to reduce premiums is to shop around and compare quotes every time your car insurance is due to be renewed. Even if your details have not changed, you need to do this every year because insurance companies change the way they calculate premiums quite often, and what was a great deal in year one, may not be in year two.
Even if you are keen to remain with your current car insurer for reasons other than price, having a few competitive quotes in hand can help you negotiate a better deal on your renewal premium.
Several of the top players are also finding ways to identify customers who are "sticky": people that do not move their business when premiums rise. This means that people who don't regularly move will get renewal premiums higher than people that do. In effect, loyal customers are penalised for their loyalty – just like the preferential "new customers only" deals offered by banks.
Tips from TheRateTart
This is not an exhaustive list, but here are some tips from TheRateTart to bear in mind when applying for Car Insurance. By making changes in a few areas you could save yourself some money.
Fully Comprehensive Car Insurance is the option chosen by the majority of car owners. This cover ensures that repairs will be paid for no matter who was to blame for an accident. So if you were to blame for an accident or if the other person was not insured, you do not need to pay out anything other than the excess amount. This also means that the risk to the insurer of having to pay out more in claims is higher, so premiums are highest for comprehensive insurance.
If your car isn't very valuable, it may be worth considering "Third Party" or "Third Party, Fire and Theft" insurance.
Third Party Insurance provides cover for the cost of repairing other cars if you are in accident for which you are to blame and is the minimum legal level of car insurance in the UK. This cover is cheaper because any damage to your own vehicle is not covered by the insurance company. But any damage to your car may have to be paid for by you.
Third Party, Fire and Theft adds in cover in case your car is stolen or if someone sets fire to it. This cover still may not pay for damage if your car is involved in an accident that was your fault.
As ever, check the terms and conditions to find out exactly what is and is not covered.
The Insurance Group. Car insurers place each make and model in a risk band from 1-20. They work out how likely a car is to be stolen, crashed or damaged and how much it would cost to repair it. The higher the band, the bigger the risk and the higher the premium. This throws out some odd statistics. The UKs most stolen car of 2003 wasn't a BMW, Porsche or Mercedes-Benz, but the Vauxhall Belmont. 99 out of every 1,000 had been stolen, despite there being only 20,000 remaining on the road.
Before you buy a new car, work out what insurance group it is in, and get two or three quotes to make sure that you can afford the insurance. If you already have a high risk car, check to see whether fitting alarms, tracking devices or going on an advanced driving course would reduce your premium.
If you have a performance or a classic car, you might want to compare your quotes with some quotes from brokers who specialise in these cars. If you go to trackdays, it is also worth asking them whether cover is included or whether you need to arrange seperate cover.
The post-code lottery is frequently used to describe variations in quality of public services between different areas. The 'quality' of your post-code as perceived by the car insurance companies can also make a big difference to your premiums, even if you have an impeccable driving record. If you are moving house consider checking with your car insurance company how your new post-code is rated.
Having off-street or in a garage, and fitting an approved car alarm and immobiliser can help reduce the effects of living in a higher risk area. Whatever you do don't lie about where the car is kept. If you need to make a claim insurance companies will always check this out. If you get caught out you may find it difficult or impossible to obtain car insurance in future.
Age and gender have a big influence on your car insurance premium. In general, the younger and more male you are, the higher your premium will be. Consider getting quotes from the specialist car insurers who focus on the needs of specific driving groups. Students, young drivers, women and the over 50s have all been targetted by insurers wanting to provide competitive quotes.
How much and how well you drive affects your car insurance premium. If you drive 50,000 miles a year, have nine points on your license and made numerous claims, your insurer might consider you a higher risk than your neighbour who drives 3,000 miles a year. Having multiple drivers with different risk profiles could also drive up your premiums - putting a newly qualified 17 year old on the insurance policy is likely to be a painful financial experience. An 'any driver' policy is also likely to be more expensive. And you need to check if any no claims bonus will build up for additional drivers - some insurers offer this and some don't. Finally, although car insurance premiums are not exactly the main reason to avoid drinking and driving, a drink driving conviction is likely to drive your premiums into the stratosphere for years to come.
Excess is a fixed amount payable by the insured (i.e. you) rather than the insurer (i.e. them) from any claim. If you have an excess of £100, and you have an accident that costs £1000 to repair, this means that your insurer will pay £900 of the claim and you the remaining £100. The majority of insurers will impose a compulsory excess on any policy. Increasing the amount of excess payable ('voluntary excess') could result in a significant reduction to your premium. If you believe the risks of your needing to make a claim are low and you could afford to pay a voluntary excess in the event of a claim, then this option may be worth considering.
Your no claims bonus. Protect it well. A driver with six years of mishap free motoring could be in line for a 65% discount on the premium. Many car insurers will now allow you to pay an additional amount to protect your no claims bonus in the event that you need to claim. You may not be given the option to do this if you only have one or two years of no-claims. If you have built up the full 6 years of no claims bonus, this may be an option well worth considering. But be aware that if you make a claim even whilst your no claims bonus is protected, you may still see an increase in your premium.
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