Insurance: Cheaper Car Insurance

It may surprise you just what can affect your car insurance, and even what doesn't affect it. However, with all these variables, it's possible to massively reduce your car insurance premiums with a little planning. With this in mind, we describe here 21 ways to do just that.

Each method is rated with either one, two or three stars depending on how likely it is to affect your insurance and by how much - in our Foolish opinion! Those marked with three stars are most likely to result in a large car insurance saving.

1. Compare prices * * *

If the best insurer will offer you cheap car insurance for £400, the worst in the market might well offer rip-off car insurance cover at £1,000; the difference between the highest and lowest car insurance quotes is always huge.

Your car dealer will almost invariably offer you expensive cover. Those guys don't need to make their insurance cheap, because it's so easy for them to cross-sell whilst you're purchasing your car.

Never accept a car insurance renewal quote from your existing insurer without checking elsewhere first, as they will not reward your loyalty - or your lethargy. If you just leave them to it, they won't usually bother looking to see if they can make it any cheaper for you.

It's important to know that insurers try to attract a certain profile. For example, one insurer may be competitive for young drivers in the city, but not so competitive with mature drivers in the country. However, insurers change their prices, and their target market, constantly. This means that an insurer who may have given you a bad car insurance quote last time may give you a good quote the next time. Conversely, your current insurer may become less competitive.

Therefore, the most important technique for getting cheaper car insurance is to compare car insurance quotes and the easiest way to do this is to search online or compare car insurance quotes using The Motley Fool's car insurance comparison engine. There's not much to say about comparing insurance quotes on the Internet; it's all straight forward. The one thing to bear in mind is that, if you're asked what your renewal premium is, try leaving the field blank. If you're not allowed to do that, enter the lowest possible value: just £1 if you can! That way no insurance companies can read your renewal premium and try to only just beat it, which often means increasing their quotes.

2. Direct debits * * *

Many insurance companies offer you the opportunity to pay monthly, rather than upfront via a lump sum. Though this might sound attractive if you're on a tight budget, be aware that you usually pay through the nose for the privilege. Insurance companies often charge APRs of up to 30% for these monthly arrangements, so save up to pay upfront if possible, or consider paying via a cheaper alternative, like a 0% credit card.

3. Car colour *

Some insurers have found that if you have a red car you're more likely to be involved in an accident. Hence, your premium can be higher. The only reason they can think of is that perhaps more show-offs use red cars, so these drivers are more likely to put their right-foot down.

Metallic paint is more expensive, so your premium might cost more. Some insurers find black cars are more likely to be involved in incidents at night. Conversely, white cars sometimes attract cheaper premiums because the opposite is found to be true. At least one insurer has found that green cars are more likely to be involved in accidents if you live in the country, because they're camouflaged! You can't see the cars for the trees.

So white is best for car insurance purposes. Colours not mentioned above are pretty safe.

4. Modifications * * *

If you don't want to pay a fortune on your car insurance, don't get a modified car. You'll find that around half of all insurers won't bother quoting for a 'mod' and most of the rest will charge you extra. Fewer quotes equals less competition between insurers, which means there is less pressure to quote a lower figure.

Many insurers find that, statistically, a driver of a modified vehicle is more likely to be involved in an accident, or a more costly accident. This doesn't just include fitting larger engines or other performance-enhancing changes; it also includes fitting noisy exhausts and even painting Go Faster Stripes!

However, a technique used by car insurance brokers is to call up insurers to discuss any modifications, because many insurers are more willing and more flexible over the phone. There's no reason why you can't use this technique too. Here's what you could do:

1. Get a car insurance quote online, but select 'No' when asked if you have any modifications.
2. Call up the cheapest insurer and ask to speak to its underwriting department. Tell them that you've got a quote without modifications, but you want them to tell you how much it would be with the modifications added.
3. They may well oblige you with a quote. Take the quote details and a reference and say you'll call them back.
4. You may want to call up two or three of the other cheapest quotes.
5. Then run another online search with modifications added.
6. Work out which of all the quotes you've received was the best and go with it.

5. Homeowners *

Homeowners often attract better premiums on their car insurance. It's believed that the reason these people have fewer car accidents is because they are more responsible, on the whole. Make sure you update your car insurance if you buy a property.

6. Married * *

The same goes for married couples. Insurers have found that if you're married you're more responsible. They've also found that if you're both named drivers you're even more responsible, so even if your spouse doesn't intend to use the car, get two types of car insurance quote: one for you, and one for both of you.

7. Where you live * * *

You might be the safest driver in the world, you may never have had a motor accident, been caught speeding, or been the victim of car crime, but if you live in the 'wrong' area your insurance premium can seem unfairly high. The general rule is that if you live in a built up area in the centre of a large city you can expect your premium to be sky high. If you live in leafy suburbia, you can expect to pay less, and if you live on the Isle of Skye insurance cover will probably cost you next to nothing!

Now don't be tempted to use your parents' address in Skye to insure the Ferrari that you actually keep at your London flat. You may get a lower insurance premium but if you have a claim insurance companies will look for any excuse to declare the insurance invalid. Lying about where the car is kept is one of the commonest tricks and one that insurance companies will check out.

8. Non-smokers *

Non-smokers sometimes get cheaper rates as well. That's why it surprises me that no insurers, as far as I'm aware, take into account whether you have a mobile. Surely holding one of those to your ear whilst driving is more distracting than smoking?

Anyway, this is just one more reason to give up cigarettes at last!

9. Get a sensible job * * *

If your name is Jenson Button and you fill out your application saying that your occupation is 'racing driver' you can expect to see a few noughts added to the end of your premium. If you are a journalist or a TV presenter you are also likely to be seen as a poor risk. (For some reason, they're seen as heavy drinkers!) Get a job as a nurse and your insurance premium will fall.

10. Drive your car less - or more! * *

If you have a classic 1973 Skoda in the garage and drive it only when it is sunny, then you may only cover a few hundred miles a year. If so tell your insurers and you will find they will lower your premiums. If you drive from London to Glasgow every weekend to see your mum then expect the insurance company to bump up your car insurance premiums to account for the extra mileage.

However, bear in mind that if you drive less than, say, 2,000 miles per year, some insurers become concerned that you may not get enough driving experience and the premium can go up a little. (This isn't likely to apply to classic-car policies.)

Many people consider 8,000 miles to be the average annual mileage, but actually we quite often do a lot less than that. Start keeping track of your mileage, as you may find you're able to reduce the figure you give your insurers, which may save you money.

11. Grow old fast! * * *

One of the advantages of getting older is that your insurance premiums fall. Once you reach the ripe old age of 25, insurance companies think that you have got rid of all that youthful exuberance that leads so many young drivers to have accidents and your car insurance premiums will start to come down. In fact, their research shows there is a marked drop in accidents among the over 25s. You might look in the mirror and think that you can pass for 40 when you are actually just 18, but if you lie about your age and have an accident you are likely to find yourself with no insurance cover at all. You'll be facing the potentially unlimited claims from the innocent victims of your (small f) foolishness.

12. Go comprehensive: it's cheaper than third party, fire and theft! * *

Insurance prices are based purely on statistics. That's why insurers can get away with prejudicial pricing. After all, in what other industry can you say you're going to charge men more than women for the same product?

Statistics often show that people who drive cheap old cars (particularly young drivers) don't seem to care much about crashing them, so they have more accidents. It's the damage to other cars and, particularly, the injuries caused to others that cost the insurers so much money. On the other hand, if you have comprehensive insurance you're statistically less likely to be in an expensive accident. That's why some insurers (Norwich Union being the most notorious) sometimes end up quoting cheaper comprehensive cover than third party, fire and theft!

You're most likely to save with this technique if you have a cheap old car.

13. Get a cheaper - or more expensive(!) car * * *

This is a bit obvious: if your car is worth more, it costs more to insure. However, if it's too cheap - less than £1,000 - then insurers worry about its reliability and will charge a little more.

14. Insurance ratings * * *

The insurance industry has some standard car ratings, from one to twenty. However, many insurers now use their own systems, which can go up to 40 or 50. With all these systems, the higher the number the more expensive it is to insure.

The rating of a car depends mostly on the engine size and weight of the car, but it can also factor in other things such as cost of replacement parts and the probability that it will be stolen.

15. It's not all about the size of your...engine * * *

We all know that size counts. However, it's not just the engine size but the weight of the vehicle that matters. If your car has a big engine and is light, then it's going to go fast. Insurers don't like young drivers with nippy cars and they price their quotes accordingly.

16. The excess * *

Most policies have a compulsory excess that is fixed and a voluntary excess, which you can vary. Changing your voluntary excess level is a way to alter your premium. It means you can choose to take some of the risk by paying a higher percentage of any claim. It is worth trying different excess levels and seeing how it affects your premium. If you are sure that you won't make a claim for less than £500 then have an excess of this level and you will see your premium fall significantly.

Increasing the excess will reduce your premium, but often only by a few pounds, which is why this just gets two stars.

17. The no claims bonus * * *

Each year that you don't make a claim on your own policy you get another year's 'no claims bonus', usually up to five years. In the industry, 'no claims' means that your insurer has not had to pay for a claim. Therefore, if you were involved in an incident that was clearly not your fault, but your insurer paid for it and was unable to recover its outgoings from the other party, it still counts as a fault claim on your file. This in turn still affects your no claims bonus. If you stop driving for a while, you can usually keep your bonus up to two years.

The no claims discount can be transferred between insurance companies and after five years of claim-free motoring you could be in line for a massive 75% discount on the premium.

If both you and your spouse have been driving on the same insurance policy, you can usually transfer the bonus to your spouse. Therefore every year you should get both car insurance quotes with you as the bonus holder and then your spouse, and see which comes out top.

If you've just bought a car, but you've been driving a company car for a while, or if you've been a named driver on another person's car, you may still be entitled to a discount. Make sure you inform the insurers when you get an insurance quote.

Finally, you shouldn't choose an insurer because of the size of its no claims bonus; you should compare many insurers and look at the overall cost.

18. The Pass Plus course: get it while it's hot *

The Pass Plus course is for young or new drivers. You pay around £130 to get this extra training. However, it is of ambiguous usefulness, as research from the Association of British Insurers (ABI) shows that drivers who have completed the Pass Plus course have a 19% chance of being in an accident in their first year of driving, but drivers who haven't done it have only a slightly greater chance, at 20%. On this basis, it's unlikely that insurers will continue to offer significant Pass Plus discounts. As a result, the ABI is working on alternative courses.

Even so, at present some insurers still offer 20% insurance reductions (down from 30% a few years ago) to first-year drivers who have taken the course.

There are two things to bear in mind. Firstly, the cost of the course will offset some of the savings you might make. Secondly, many insurers may offer cheaper car insurance quotes even without Pass Plus course discount. Let's say that Insurer A offers cover for £900 with no reduction. Insurer B offers cover at £1,000 with 20% off, making it £800, so you save £100. Still, you'll be worse off by about £30 with Insurer B, because you also paid for the Pass Plus course. This scenario is not uncommon.

The best thing to do is for future car owners to compare insurance quotes with the Pass Plus course and quotes without, and see if you're likely to make savings. Bear in mind that if you get insurance quotes and then take a few months to complete the course, your insurance profile may then have changed; if you've moved address, decided to buy a different car or if you've had a birthday, you may find that the new quotes with the Pass Plus course are no good.

Some councils give grants on a first-come, first-served basis for Pass Plus students, although when they catch on to the ABI statistics they may stop doing this.

Although some people still save a lot of money on their motor insurance by doing this course, it might not be for much longer. Plus, quite often insurers quote cheaper without it. Hence the Foolish rating is just one star.

19. Motor incidents * * *

Most insurers require a full incident history, regardless of whether or not a claim was made. This means that, if you've had any incidents where there was no damage or it was settled directly between the parties (i.e. the insurers didn't get involved), your insurance quote might still be affected.

But it needn't be this way! You could follow the steps in 4. Modifications above: compare quotes with and without these incidents and give the insurers a ring. Many of them will allow you to proceed without including the incidents in the insurance quotation. Just remember to take a reference in order to cover your back.

20. Where you park * *

Clearly parking your car every night in a locked garage will result in a cheaper car insurance quote than parking on the street. However, what's less well known is that in the 'parking on the driveway' vs. 'private parking' battle, parking on the drive usually wins. Also, using a car port is no better than parking on the street.

21. Named drivers * *

Putting more drivers on your policy can increase your insurance premium, but sometimes it can reduce it too. Consider getting insurance quotes with and without extra drivers who live at your address. This could only work if the extra drivers have good records and they usually have to have vehicles of their own as well.

Compare car insurance quotes.

Published on December 8, 2006