Welcome to BuyAssociation.co.uk

Guide to Car Insurance

Introduction

Of all the financial products sold in the UK, there is no doubt that car insurance is the one that is most commonly held by consumers.

This is hardly surprising: alone among so-called “personal lines” cover – policies that protect your life, home, health or income – car insurance is the only one that it is compulsory to have. If you are stopped while driving without it, prepare to be prosecuted.

In theory, this ought to make everyone a car insurance expert. After all, here is a classic “grudge” purchase, one we resent paying too much for.

What better reason could there be for knowing every trick in the book that helps bring the cost of premiums down?

The irony is that, by and large, most of us tend to stick with the same insurer for too long, often paying hundreds of pounds more a year than we need to. We only change policies when premiums become very noticeably too dear.

And few of us bother looking through the small print on our policies – with all sorts of dire consequences when it comes to a claim.

Which is why, knowing how motor insurance works can help you get a better deal – not just on price but in terms of the service you may need.

What type of motor policies are there?

The minimum type of motor insurance you can take out is “third party”. This covers liability for:

• Injuries to other people, including passengers

• Damage to other people's property

• Passengers for accidents caused by them

• Damage arising from the use of caravan or trailer while attached to the car

The next step up is “third party, fire and theft”. This provides the above cover, plus fire or theft of the vehicle.

“Comprehensive” insurance provides cover for the above, plus:

• Accidental damage to your car

• Personal accident benefit

• Medical expenses

• Loss of or damage to personal effects in the car

What determines the cost of motor insurance?

People often grumble about rising insurance costs. Why do prices go up?

1) The soaring cost of litigation: drivers are more likely nowadays to claim for personal injury, like a serious case of whiplash, and the amounts paid out for injuries are much higher than they used to be.

2) NHS costs: accident and emergency departments can now claim for cost of treatment from the insurance company.

3) Uninsured drivers: official statistics say that one in 20 drivers is uninsured. But recent research carried out by Direct Line and Mori suggests that this figure is more like one in 10 drivers, albeit that the uninsured period in many cases may run to just a few days or a few weeks – although this is cold comfort to someone who is involved in an accident with an uninsured driver. This adds around £30 to the average annual premium.

4) Falling stock markets: money taken in premiums is often invested until it is then paid out in claims. Not much use if markets are plummeting. Again, the recovery in world stock markets since 2003 is what has helped keep premiums at “reasonable” levels.

Ironically, this produces a Catch-22 situation: as premiums get higher it becomes even more tempting for some people not to take out insurance.

What about my quote?

Postcode: you are deemed to be higher risk if you live in a city or urban area - especially if you park your car in the street. Security measures – alarms, locks and so on reduce premiums.

Age and experience: newly qualified drivers - or drivers under 25 - are deemed more likely to have accidents than older, more experienced drivers.

This has important lessons for parents: adding teenage drivers to a policy can significantly increase your premium. It is sometimes cheaper to add a teenager on a temporary basis, for example during a holiday.

Also, attending special courses, such as those by the Institute of Advanced Motorists (IAM), will often lead to a discount.

Claims history: the less you claim, the less you pay. Five-year no-claims discounts are best.

Excess: the more money you’re willing to pay out as excess, the lower your premium. The average excess is £200, but can be higher.

Buying insurance - Where to get a policy from

There are a number of sources of motor insurance quotes. Here are the main ones:

• An “old-style” insurance broker. Brokers are the people to go to if the type of policy you need is out of the ordinary, for example because it is a vintage car, or a high-performance vehicle, or because you have a “spotty” driving history in terms of claims or convictions. They can research the market for you and offer a personal service. They also act on behalf of the client when it comes to making a claim

Of course this costs money. Usually, though not always, a policy taken out through a broker will cost more, largely because they receive a hefty commission for selling it

There is also the option of online brokerages/intermediaries, that will have 10, 20, sometimes even more insurers on their books. When you obtain a quote from them, they will search for it from their “panel”. Bear in mind that not all insurers on a panel will offer competitive quotes for a given “risk” – that’s you. So the competitive deals on offer may still be restricted to a handful

• Direct insurers. Here, you go to an individual company’s website and buy a policy from them. The advantage is that of speed and convenience. And if you like the company, all is well and good

The potential downside is that you will pay too much. If you are shopping around, whether on the phone or over the internet, it also takes a lot of time to give your details to each insurer, or input them on their systems

• Comparison websites. These will ask you a range of personal details and then use software to get quotes on your behalf from every website they have access to. The benefits are that you get a far wider spread of the market in terms of potential quotes

The downside can sometimes be that when you go through to the insurer who seemingly gave the cheapest quote you are asked to supply more information – only to discover that the real price is higher than you originally thought.

More pages

Page 1: Introduction
Page 2: The information you need

Free ink cartridge click here new customers can order an ink cartridge for £0

Get Your Website On The First Page Of Google On A Budget FREE website health check and white paper on SEO in a recession

Document sharing - share, edit and save documents Secure document collaboration made easy!

Free delivery on office supplies everything from stationery to office furniture

Click here for a free consultation - make foreign exchange work for you