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Everyone who wishes to drive on the road needs to buy some form of car insurance so it's worth taking a few moments to familiarise yourself with how an insurance company determines the price you'll pay. Armed with this knowledge and some helpful tips you should be able to find the right company and the right product for you. Insurance companies offer three main types of cover - fully comprehensive, third party fire and theft and third party. Third party means that if you have an accident your insurer will only pay out damages to the person involved in the accident with you and you receive nothing. Third party fire and theft extends this to include cover if your vehicle is stolen or set alight, whilst fully comprehensive cover will also pay out damages to you. Third party insurance is only really attractive if the value of your vehicle is low and the difference between the fully comprehensive and third party price is significant. The best example of someone who should seriously consider third party insurance is a young male with a car of value less than £1000. It also depends on how confident you are in your driving because if you can avoid accidents altogether you'll pay less. A big note of caution here though because a lot of people overrate their driving and you may be unlucky and get involved in an accident that isn't your fault. What else determines the price of your cover? An insurance company needs to build up a profile of you so it can determine the risk level you represent. So, if you're an inexperienced driver you pay more as you're more likely to be involved in an accident. I've heard numerous complaints, and voiced some myself, along the lines of ‘this is discrimination - just because other young male drivers have lots of accidents it doesn't mean I'm going to!' Unfortunately for some, insurance companies are allowed to vary prices based on statistics relating to the category of driver you fall into. Whilst you can't do anything about your age or gender, you should be aware that some companies take different views on the amount of risk certain categories of drivers represent. These are often smaller companies who can't compete with larger rivals but who believe if they focus their marketing and products on one specific type of customer they can exploit a niche in the market. However, just because a company says it caters exclusively to women or younger drivers it doesn't necessarily mean they are going to offer the best price so make sure you shop around. What factors can you change to get the best quote? I'll try and start with the most important ones but also get down to the more detailed and subtle points. I suppose the main one is the actual car you're driving. If it's powerful it's more likely to be involved in an accident and if it's valuable and spare parts are rare or expensive then it's going to cost more to repair. I'm not saying go out and buy a cheaper car just to save on insurance, but beware that additional extras will raise the price of your cover so consider if you really need them. The amount of excess on a policy is another important factor. In the event of a claim being made, the excess is the amount you need to pay out of your own pocket for any repairs before the insurance company has to pay anything. The insurance company believes that if you have a large excess you'll be more careful on the road and will therefore offer you a lower quote. A large part of your decision is going to involve whether you would be able to pay a large excess and how likely are you to cause an accident. Note that I say cause, because with most insurers you can claim back your excess from the third party's insurer if the accident wasn't your fault. Next, you should try to build up a no claims bonus and avoid incurring any sort of motoring offence. Many insurers offer a protected no claims bonus whereby you can pay extra to preserve your no claims bonus even if you have an accident. Other factors that affect your risk profile are the amount of miles you drive so make sure the figure is accurate and up to date, where you park so ideally store the car overnight in a garage or at least off the street, and whether the vehicle is fitted with security devices. A less well known measure to save money is to join an owner's club as some insurers believe ‘enthusiasts' drive more carefully - if you write off your car you can't be in the club anymore! Try to avoid monthly premiums if your outgoings will allow it, or consider whether obtaining a credit card to make these payments would be cheaper. Also look into what is included in the price - if you have access to a second car then a hire car won't be necessary. On a final note try your best to use as many of these tips as possible and shop around to find the best deal. Be aware that there is often room for negotiation but do not lie to reduce your quote because insurers will investigate claims and will not pay out anything if you gave them false information. Good luck in your search!
Staff editor, Insurance Section, March 2007 |
