FOOL SCHOOL
Saving Money On Your Car Insurance

August 9, 2002

Insuring your car can be very expensive. If you are 18 and living in inner London, for example, you are likely to find that the cost of insuring your hot hatch is as much as the cost of the car. And go-faster stripes and alloy wheels are likely to make matters worse. But there are some measures that you can take to reduce the cost of motor insurance.

Buy a smaller "lower rated" car

Insurance companies rate cars from 1-20. Quite simply, the higher the number the more expensive it is to insure. The rating of a car depends on a number of things such as engine size, cost of replacement parts, the probability that it will be stolen and many other factors known only to insurance companies. Small cars with small engines and low price tags will usually have the lowest insurance rating while big cars with big engines and price tags that would rival house prices will have the highest rating.

Live somewhere rural, with views of green fields

You might be the safest driver in the world, you may never have had an accident, been caught speeding, or been the victim of car crime, but if you live in the 'wrong' area your insurance premium can rocket. The general rule is that if you live in a built up area in the centre of a large city (especially in central London) 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 Sky insurance cover will probably cost you next to nothing!

Now don't be tempted to use your parents' address in Sky 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.

Lock your car away at night

If you park your car on the road at night expect to pay more. If you park it off the road then the premiums will come down a bit, and locking it safely in your secure garage every night will ensure even bigger savings.

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 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.

Be a girl!

Yes, girls are more sensible than boys. Girls are better drivers than boys and they have fewer accidents and so have lower insurance premiums. But cross-dressing does not entitle you to a discount. (And if you chaps are bristling at the thought of being penalised for being male, console yourselves with the thought that insurers think women can't handle motorbikes and charge them higher premiums for bike insurance).

Don't let anyone else drive your car

The more people driving your car, the higher your premium. It's better to not allow anyone but yourself to drive the car. If you need to add in extra drivers (your husband / wife / partner) then decide who will be allowed to drive and state this in your application. If you want to leave the car insurance open for anyone to drive, make sure your insurer knows this. You'll usually pay more but it does enable you to have more flexibility, although there may be restrictions -- for example, many insurers do not allow driver's under 25 on an 'any driver' policy.

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.

Be a sensible driver

If you have any points on your licence own up to it! If you have an accident and it is your fault the insurance company will find out. Having 3 points on your licence will do little to your premiums, so own up to it, but try very hard not to get any more. If you have ever been banned for drink driving then expect to pay heavily in the future (and you won't find anyone at the Fool sympathising with you!)

If you have had any claims in the past, and, in particular, if you were liable for an accident, you will be classed as a higher risk for accidents and this will likely mean a higher premium. The good news is, as your record improves, many companies will lower your premium, so if you have been a poor driver with a bad record of accidents and driving convictions, learn from your mistakes and keep a clean record in the future.

Drive your car less

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 premiums to account for the extra mileage.

Fit an alarm and immobiliser

Alarming your car with the highest category alarm system and installing an immobiliser will encourage most insurance companies to reduce your premium. If you are a car thief you will have a massive choice of cars to steal in the night so why bother trying to disable an alarm system on a car when you can move on to the next one without one? Make sure you fit an approved anti-theft system. One that gushes flames out of the sides when the car is tampered with might well discourage a thief, but if it ain't approved, they won't reduce your premium.

Have some excess

No, we don't mean on the drink! The excess is the amount that you have to pay out of a claim before the insurance company has to cough up. Most policies have a compulsory excess that is fixed, and then 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 will not make a claim for less than £500 (and if you do it is likely to affect your premium for next year) then have an excess of this level and you will see your premium fall significantly.

Build up a No Claims Bonus

Insurers love Fools who don't make any claims. After all they can take in the premiums and not pay any out, so if you can drive for a number of years without making a claim then your insurance company will reward you with a discount on the premium. The 'no claims' discount can be transferred between insurance companies and after 6 years of claim free motoring you could be in line for a massive 65% discount on the premium.

If you have a 'no claims' bonus think about protecting it. It will cost you a bit more, but it means that if you make a claim you won't lose the discount of the next year's premium. Typically, two claims are allowed in a three to five-year period. It really is worth considering if you have built up a full 'no claims' discount, because even small claims, can mean you lose it. The prospect of losing your discount might prevent you from claiming at all -- which is what insurance companies are hoping for.

What if you have been driving a company car for the last twenty years and now have to insure one of your own? Will you now be liable to pay the full premium even if you have a perfect driving record? What if you have a 'no claims' discount on one car and now own two? Most companies offer 'introductory discounts'. You could be eligible for one if you have previously driven a company car but recently given up the use of it, or if you own and insure other cars and have built up a 'no claims' bonuses on these. If you have never insured a car before always ask for an introductory discount.

Compare

Finally, the trick is to always compare a number of different insurance companies. The difference between the highest and lowest quotes is often massive. The most important thing is always shop around. And never ever simply accept a renewal quote from your existing insurer without checking elsewhere first.

> Get a quote in the Fool's new Insurance Centre