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Car insurance costs may have dropped slightly in the past year, but many are still overpaying by 100s. Now's an ideal time to check out our key tricks, including never auto-renewing and how hitting the sweet spot can bag the cheapest policy.
This guide explains the basics of car insurance, what to watch out for and reveals how you can slash the cost of cover in six easy steps. If you're under 25, check our Young Drivers' Insurance guide for more.
At its most simple, car insurance covers you if your car is stolen or involved in a road accident. It also protects other road users if you cause damage to their vehicle or property.
The cost of insurance your premium is based on how much of a risk insurers perceive you to be. For example, if you are a youngster ready to hit the highway after just passing your test, or you have had more than a prang or two, you will pay more.
However, if you can prove you are not a risk by keeping accident-free and storing your car safely, you will pay much less.
Excesses: What are they and how do they impact claims?
Third party, 'third party, fire and theft' and comprehensive: What is the difference?
As well as understanding an excess, knowing the difference between the three main types of car insurance is a must: 1. Third party
Third party is the minimum level of cover you need to legally drive or even keep a vehicle that has not been SORN-ed (see Gov.uk for more). It can be the cheapest option but it covers very little, only protecting others on the road, and property like walls, homes and streetlights, from your bad driving. So, if an accident's your fault, third party pays for the damage you cause to another driver's vehicle and their property and protects any passengers. It will not cover you for any damage to your own vehicle so you will be expected to pay this cost yourself.
2. Third party, fire and theft
Third party, fire and theft is an extension of third-party only insurance but also protects your vehicle if it is stolen, or if it catches fire. 3. Comprehensive
Comprehensive is the widest level of cover available. If you have an accident and it was your fault you can claim the cost of repairing your car and any other damage you may cause to a third party. The cover also includes accidental damage, vandalism and usually windscreen repair. You may be able to drive other people's cars, although this is likely to only be up to the level of third-party coverage. You may also be covered to drive hire cars. These are not standard features so check with your insurer before you buy so you are clear about what is included. (See does my policy cover me to drive other vehicles? for more.)
Other vehicles: Does my policy cover me to drive them and can other people drive my car?
Obviously car insurance will cover you to drive your own vehicle (you have insured) but some comprehensive policies insure you (not the named drivers) if you're driving the cars of your friends and family with their permission of course. Check with your insurer that you definitely have this extension of cover. This is different to bicycle insurance where most specialist policies will only cover the cyclist named on the policy (though bikes insured on home contents can be lent to family members). You may also be covered to drive hire cars too. However, if your comprehensive cover allows you to drive other vehicles this is usually only up to the level of third-party coverage so no theft or fire damage is provided.
If you're the generous sort, you can add other drivers to your policy known as named drivers and they'll be covered to drive your car. Even if you're not the generous sort, adding a second responsible driver can also help lower the cost of your cover.
No-claims discounts: What are they and do they need to be protected?
Going abroad: What if I want to use my car overseas?
If you drive your car outside the UK but within the EU (eg, a day trip to France) or other European countries such as Andorra, Liechtenstein, Norway and Switzerland, an EU directive means you'll automatically get third-party only cover, even if you don't tell your insurer.
This means you'll be driving legally but under the third-party extension of your policy, so your car won't be covered for damage or theft. This third-party cover applies even if you have comprehensive UK cover. But some policies come with full Europe-wide insurance, covering you across the Continent.
If yours doesn't, call your insurer giving your dates of travel and the countries you'll visit (or plan to pass through, even if it's only for a few hours) to extend the policy cover, but there may be a charge.
Our research shows some providers, including Direct Line, Churchill and Privilege, offer this free if you're only going for up to three days, but that's not a universal rule. You can be charged around 20-30.
If you extend your trip, you're likely to have to pay extra possibly around 15-30 more. Don't forget about breakdown cover. See our full Breakdown guide for more.
Applying for a quote: How honest do I have to be?
Got a car but hardly drive it: Do I still need insurance?
Mileage: How to estimate your mileage
Accidents: Do I need to tell my insurer if I have a prang but don't claim?
Change in circumstances: Do I need to notify my insurer?
If any of your circumstances change it is important that you tell your insurer. If you don't and then try to claim, even for an unrelated issue, your whole policy may be invalid. You should tell your insurer about any change, even if it's just your address. This is crucial as it reduces potential problems in the event of a claim. Trying to get insurance after you've had a policy cancelled is very difficult and expensive. A change in circumstances includes moving jobs, as insurers believe this can affect your risk. You may also save on insurance if you're in a stable relationship for instance, living with a partner rather than listed as single. And watch out for modifications too. For example, putting a tow bar on to your car to pull a caravan or trailer counts as a modification, so it's vital to let your insurer know you've got one. Most car insurance policies don't cover attaching a trailer as standard so double-check some may charge you a slightly higher premium.
Young drivers: I'm under 25, is there a way I can cut my insurance premiums?
Now you know the basics of car insurance, follow our step-by-step guide to slashing the cost of your premium, starting with 12 car cover need-to-knows.
Did you know the average driver faces an annual insurance premium of 680 with drivers younger than 25 paying over 1,400 for cover? Here are our top car insurance cost-cutting tips that can save you 100s.
Don't assume third party is the cheapest You would expect third-party cover to be the cheapest because it is the lesser cover, just covering the person you bump into and their car. Yet don't expect car insurance to be logical. With some insurers the mere fact you have selected comprehensive, which includes your car too as well as fire and theft, means you'll be assessed as a lower risk (based on actuarial history, which is what an insurer will hold about a particular age group or address, for example, on which they base their premiums). This can outweigh the fact you get more cover, and make your policy cheaper.
There are no hard rules here, it's a matter of trial and error, yet if you're just looking for the very cheapest cover, never only check third party. My auto renew quote was 210 for 3rd party only. I went to a comparison site and got comprehensive breakdown cover & free car hire with the same company for 40 less. Forumite DobbieSloan Should I get third party or comprehensive cover? Third-party cover is generally most suitable for those: With cars worth less than 1,000 Aged under 25 (though also read Car Insurance for Young Drivers) Comprehensive is a good idea if your car is worth more than 1,500, and is more important the more valuable your car is. Many insurers will only offer comprehensive cover for cars over a certain value anyway.
Nothing better illustrates car insurers preying on loyal customers than Sarah Cooper's tweet. "My car insurance renewal is 1,200. New policy with same company is 690. How do they justify this?" They don't. They just do it.
Insurers charge more each year, knowing inertia stops policyholders switching. And even though new rules mean insurers must now tell you the premium you paid last year in correspondence to you, don't rely on this to take action. If your renewal is coming up, jot it in your diary to remember it. Compare comparison sites and then call your insurer to see if it can match, or even beat, the best quote you found. If it can, you're quids in. Last year I paid 258 car insurance. The renewal quote was 608. I paid 199 using your comparison site process. Thanks. Sue via email My auto-renew price for two vehicles including a 21-year-old named driver son on smaller vehicle was 1,024. I followed the advice given in the guide to get a better deal with Direct Line for 590. Forumite Rawhide Finally convinced the other half to challenge car insurance renewal quote. Reduced from 520 to 219! @laedeejaedee What will insurers charge me to stay? As well as insurers refusing to offer you the special rates that are available to new customers, there is often an administration fee charged for renewing your policy.
Here's a list of some of the providers which impose a renewal fee. If you know of any others, tell us so we can add them to this list of shame. For more haggling tips, read the full Haggle On The High Street guide together with The Top 10 Firms To Haggle With.
Only buy add-ons if you know their value Insurers often try to sell you additional products such as windscreen or breakdown cover. Avoid buying these if you don't need them and, if you do, always check out the cost of the cover individually first. Many insurers make a large mark-up by selling add-ons at higher rates than you can get elsewhere. Also, some of these add-ons may already be included in your policy, so read all the terms and conditions carefully. Insurers can also throw in free add-ons (like those listed below) in your first year as a sweetener but after that you'll need to pay. To grab these freebies follow these three steps: Make sure you switch insurers every year to avoid paying for add-ons. Check what's on offer via comparison sites as insurers often have exclusive offers set up with them which you can't get by going direct. Always try to haggle with your current insurer. Ask if it can offer you a better deal than a rival and, if not, don't be afraid to switch to a provider that will. What are the typical add-ons? Windscreen cover
Windscreen cover may differ from provider to provider but, at its most basic, it pays out if your windscreen is damaged and needs to be repaired or replaced. Your windscreen is usually covered under your comprehensive car insurance policy but separate cover will pay to repair your windscreen without claiming on your car insurance. This means no excess and no impact on your no-claims discount.
This doesn't bear thinking about but say you had an accident that left you badly injured and you needed to claim damages for your ongoing medical costs. This cover will help you reclaim these costs from the insurer of the driver at fault, with the help of a legal team, so you're not out of pocket. It will also help recover your excess in the event of an accident where a third party was involved and can be traced.
Courtesy car cover provides you with a replacement vehicle while yours is off the road, if you've had an accident or need to make a claim. There are different levels of courtesy car cover some will only cover you if your car can be repaired, while others will cover for complete write-offs, or if your car is stolen.
Breakdown cover varies but, at its most basic level, it ensures your vehicle can be recovered from the roadside and fixed on the spot (or taken to a garage if it can't be repaired there and then). You can increase the cover to get assistance if your car is spluttering in the driveway or to get a hire car if you need a short-term replacement. For more info see our Cheap Breakdown Cover guide. Excess insurance
As its name suggests, excess insurance is designed to provide the funds to pay your excess in the event of a claim. There are two types of excess insurance: the first, known as 'single cover', only covers one policy, while 'multi-cover' will insure excesses you have across a number of different policies. Key cover
If you lose your car keys, key insurance can cover the cost of replacing keys and locks. Key cover typically comes without an excess and some policies can be extended to also cover members of your family.