Guide to Car Insurance

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If you have a car, even if you only occasionally drive, you must have car insurance. Luckily, finding cheap car insurance does not have to be complicated.

What is car insurance?

Your car is an expensive purchase. It’s very likely that some other people’s cars out on the road are even more expensive. So what happens when your expensive car crashes into another, potentially more expensive, car? That’s where motor insurance comes in.

Insurance pools the money from lots of people and pays out to the minority of people who have an ‘insurable event’. For auto insurance, that can mean an accident, theft, or a tree falling on your car. It also can pay out when you do damage to something other than your own car — like someone else’s car or a building.

This can be good for you because it can reduce the financial burden of getting in an accident, having your car stolen or other accidental damage. It can also be good for others on the road, because they can be sure that if you hit them, you have the financial backing (the insurance cover) to pay for the damages.

Does it seem like a waste of money to pay for car insurance in a year that you don’t need it? It may. But that can be misleading.

According to data from the Department of Transport, there were 327 accidents per billion miles driven in 2019. If the average person drives around 8,000 miles per annum, that means each person’s risk of accident is somewhere around 0.3%. So it’s (thankfully) not that surprising that you wouldn’t get into an accident during a given year. A car insurance provider takes these statistics — along with a lot of other numbers — into account when determining car insurance rates. So, in a very basic sense, the amount you pay reflects the average cost of an accident and the likelihood of getting in an accident (that and all of the other things, like theft, that car insurance covers).

Some drivers will end up having more accidents than the average, and their insurance provider will have to pay out more than what that driver paid in. Other drivers will have fewer accidents than average, and their insurance provider will pay out less than what the driver paid in. Unless you can see the future — and if you can, let us know, we want to talk to you! — the tricky thing is that you don’t know ahead of time which driver you’ll be. Car insurance is designed to protect you in either case.

Do I need car insurance?

Hopefully what’s above helps you understand why motor insurance is so worthwhile: it is a useful protection against costly auto accidents, theft or other auto-related accidental damage.

But to the question of whether you need insurance cover, the short and simple answer is: yes.

What if you only drive back and forth to work? Yes, you need car insurance. How about just driving once per week to the grocery? You need insurance. And if you only drive once per year to go on holiday? You may have guessed it… but you still need insurance.

Unless you’ve officially taken your car off the road and filed a Statutory Off Road Notification (SORN) with the DVLA, the car needs to be insured.

For those that don’t heed the need for insurance cover, the penalties can get severe. If you’re caught driving without proper motor insurance, you can get an immediate £300 fine and six penalty points. If your case goes to court, you could face an unlimited fine or even be disqualified from driving.

You don’t need to get caught driving to get penalised. If your car is not properly insured, you could get a £100 fine and the vehicle could be wheel-clamped, impounded or destroyed. There’s also the potential for court prosecution and a £1,000 fine.

How to compare car insurance quotes

If you want to save money on your auto insurance (and who doesn’t?), comparing the price of insurance quotes is obvious. But is the cheapest car insurance the best choice? Not necessarily.

Assuming you’re opting for comprehensive car insurance cover, there will be differences in the coverage from one policy to the next. One may offer a high level of personal possessions protection as standard, while another may not offer personal possessions cover as standard at all. One may provide for a certain number of claims without affecting your no-claims bonus, while another may ding your no-claims streak on your first claim. Some of these differences may not matter to you, but others could make a slightly more expensive policy be a better deal for you.

But it also goes beyond the details of the policy. How the insurer accepts payment for your cover can be easy or a source of frustration. The quality of customer service can be a great benefit or a reason to pull your hair out. How much your car insurance provider allows you to do easily online or via an app can be a big time-saver. And, of course, some car insurance companies are known for quickly and readily paying for claims, while others may drag their feet or generally be difficult when a claim is submitted.

None of this is readily evident from the price of the car insurance quote, but could make a big difference in your experience. For that reason, when you compare car insurance quotes, it is well worth your time to take a few minutes to investigate the insurance provider you’re considering.

You can visit the website of the insurer, read some online reviews (bearing in mind that people are more likely to leave online reviews when their experience was negative!) and possibly even call the insurer’s customer support line. You can start with the car insurer with the cheapest quote and work your way up, looking for the insurer that strikes a good balance between low cost and good service level and reviews.

How to get cheaper car insurance

If you’re wondering how to get cheap car insurance, there are actually quite a few ways, some of which you can do right now, while others take more time (but are still worth it!).

What you can do right now to get cheaper car insurance

The impatient among you can rejoice, because all of the following are ways to potentially get lower car insurance rates and can be done right now.

1. Compare car insurance rates on multiple comparison sites

When you visit most car insurance comparison sites, you usually see a claim about how much money you can save by using their comparison. If you also read the small print, you’ll notice that the savings typically applies to 50% of customers. That means there’s a 1-in-2 chance that you won’t save that much, and may not save at all!

That makes it a great idea to compare quotes across multiple comparison sites, because they don’t all have the same insurance providers and don’t give the same results. If you run comparisons on multiple sites, you raise your likelihood of finding the cheapest car insurance policy that meets your needs.

2. Check insurers not on the comparison sites

Not every insurer appears in the comparison tables. Examples include Aviva and Direct Line. Check prices individually for these insurance groups, so you don’t miss out if they’ll offer you the cheapest price.

3. Pay annually

You do have to pay a lot more at once if you pay your insurance premium annually. However, you’ll very often save money by paying annually instead of monthly. It’s easy to figure this out: multiply the monthly price by 12 and compare it to the price for paying annually.

4. Increase your voluntary excess

The excess is what you pay when you have a claimable incident. That is, if you have a £250 excess, if you get in a car accident and the claim is £4,000, you’ll pay the first £250 and the insurer will come up with the rest. Your insurance provider will set a compulsory excess that you don’t have a say in. However, raising your voluntary excess will often lower your insurance premium. But think this through first and consider whether the level savings is worth it — after all, a higher excess does mean more for you to pay if you do file a claim.

5. Choose your optional extras carefully

Add-ons to your policy like windscreen cover, breakdown cover or no-claims bonus protection may be worthwhile. The key word there is ‘may’. They also increase your car insurance premium. And since they are typically very profitable for insurers, insurance companies are keen to encourage you to pile on these optional extras.

The simple solution here is to consider your needs. That’s all. Don’t avoid add-ons as a rule, but also don’t tack them on your insurance policy without considering whether you need them, or whether they’re worth the price.

It can also be worth shopping around on some of these. For instance, is it cheaper to buy breakdown cover as a separate policy rather than as an add-on to your main car insurance?

6. Consider the named drivers on the policy

Since insurers price their policies based on the risk they face, it stands that it makes a big difference who the named drivers are on a policy. If the policy is for someone who would be rated a high risk by insurers — a young driver, for instance, or a driver with a history of accidents — adding another, lower-risk driver to the policy could bring down the rate. And if there is a high-risk driver on the policy who doesn’t actually use the car, remove that driver from the policy, as having them on may be increasing the price.

Be careful here and don’t try to find a loophole. If the riskier driver is truly the main driver of the car, don’t try to claim that the lower-risk driver is the main driver. This is called ‘fronting’ and is illegal. Fronting could invalidate your insurance policy and lead to fines and penalty points on your license. And if a higher-risk driver does use the car in question, removing them from the policy makes it illegal for them to drive the car.

7. Put your car in the garage

Have a garage? Use it! Garages are there to keep cars safe, and if you regularly keep your car in the garage, it could help bring down your insurance cost.

If your garage is so full of non-car items that you can’t fit your car, then consider this a great excuse to do some much needed cleaning (and maybe selling).

Don’t fret if you don’t have a garage, and don’t rush to get a garage spot. Parking in a garage can lower premiums, but doesn’t always. And parking garages in cities are notorious for leading to damage claims, so getting a spot in a big garage could work against you.

8. Double check your job title

The job title you put on your insurance application can make a difference. Insurers use your job title as one of the signals to gauge your risk as a driver, and they see some job titles as more risky than others. That means that you should not treat the job-title question as a throwaway and instead consider how the title you put down affects your policy price.

Don’t get too clever here, though. Be thoughtful about what title you use, but be honest. Lying about your job title could cause you issues with your insurance (lying is also just not recommended as a life practice).

What you can do over time to get cheaper car insurance

The points that follow are hard to do overnight. But over time, attending to these are a good idea not only because they’re generally smart things to do, but they could lower the cost of your car insurance.

1. Drive safely

It’s never too late to start being more cautious and safe on the roads. There are a lot of reasons to do it. Safer driving can keep you safe, it can keep other drivers on the road safe and it can help you avoid costly fines from driving infractions. And, of course, it can help lower your car insurance.

Consistently avoiding accidents and driving infractions helps. There are also driving courses like Pass Plus that will get some insurers to lower your policy price. And then there’s also the so-called ‘black box’ insurance, which uses a telematics box to track your driving and can reward you for proving that you drive safely.

2. Choose a car that’s less expensive to insure

While it may be tonnes of fun to own a Ferrari or a Bentley, these are among the most expensive cars to insure. Sure, the idea of buying a Skoda or a Hyundai may not be nearly as exciting, but the amount of savings on your insurance policy may be quite exciting.

To be sure, most of us aren’t considering a Bentley as our next car. But the point is that the car you’re driving can make a difference to how much you pay in insurance. So when it is time to invest in a new vehicle, do a little research to find a car that both meets your needs and is less expensive to insure.

3. Improve your credit score

It’s true, your credit score may affect how much you’re paying for car insurance. Those with a higher credit score may be able to get cheaper car insurance quotes. And even if it doesn’t affect your premiums, a low credit score could affect your ability to pay monthly — though, as we mentioned above, we generally suggest avoiding the (typically higher) monthly premiums.

At The Motley Fool, we are big fans of doing things that improve your credit score, and this is just one more (very good) reason to work towards a higher score.

4. Don’t auto-renew

It’s nice for an insurer when that auto-renew box is ticked. Another year rolls around, and they get another year of premiums from you without having to work for it. But is that what’s best for you? Maybe not.

When your renewal time is coming up, take the time to run comparisons and see what other insurers might offer you. Then, you can haggle with your current insurer to get them to match — or at least get closer — to their competitors. Or, you can simply jump ship and go to one of the cheaper competitors.

5. Make smart changes to your car

Turning your mid-range Seat into a Fast and Furious street racer may lead to higher premiums from your insurer. But other changes you can make to your car, including adding an alarm or immobiliser, could lower your insurance costs.

What do you need to get a quote?

If you want to get a car insurance quote on a comparison site, you can save yourself some time by having a few pieces of information close at hand.

Having your car registration number at the ready can really speed things up. If you don’t have it, you can try to look up your registration by car make and model, but having the registration is much easier.

You’ll need to know some basic information about your car — like how many miles it’s driven per year and where it’s kept during the day and night. You’ll need to be ready with information about yourself as well — like your address and job title. Some of these are very straightforward, for instance, your address. Others you might want to be more careful with. For example, don’t just guess on the car’s annual mileage. Listing high annual mileage can increase your premium, while putting far fewer miles could cause issues with your insurance later. Likewise, as discussed above, different job titles may yield different insurance prices.

In addition, you should think through what policy levels and add-ons you want. These can have a big impact on how much you pay for your insurance, so making sure you have what you need, but not more, is key to getting the cheapest insurance possible.

What features can I get with my car insurance policy?

There are many choices to be made when purchasing car insurance. Some of these decisions are important, while others are less so and provide cover more to avoid inconveniences. You might ask then: how can you tell the difference?

The best thing you can do is spend a bit of time thinking about the options and matching the choices to your needs and wants. Note that if you choose to go with comprehensive car insurance, there’s a lot more that’s included as standard. If you opt for third-party coverage, there’s less included as standard, so you’ll need to spend more time thinking about whether you should add optional extras.

Here are a few of the options you’ll have, along with some information to help you consider your choice:

  • Breakdown cover – Breakdown cover helps you out if you have car troubles and need a repair while on the road. This may mean a mechanic fixing your car and helping you get back on your way, or it may mean a tow to a repair shop where you can have the problem fixed. Many policies include some level of breakdown cover as standard, others offer the option to add on or boost coverage. There’s also the option to purchase a separate breakdown cover policy.
  • Personal possessions cover – This coverage protects you in case of theft of personal possessions from your car. As most of us spend more than a few quid on our mobile phones, that alone could be worth making sure there’s decent personal items coverage in your policy. Most comprehensive car insurance will have some amount of cover for personal items, but the level of coverage varies by insurer. More limited policies — like third-party coverage — typically do not include cover for personal possessions.
  • Windscreen cover – Damage to your windscreen is typically covered with a comprehensive car insurance policy. However, if you have just third-party cover, it may not be. Additionally, standard windscreen cover will usually require that you pay your full excess and may hurt your no-claims bonus. Adding on extra windscreen cover — whether as an add-on with your main policy or as a separate policy — can be beneficial for both of these reasons. Submitting a claim with an add-on windscreen policy won’t affect your no-claims bonus. And the excess for the windscreen cover is separate, and usually much lower than your main insurance excess.
  • No-claims discount cover – The more time that you go without filing a claim with your insurer, the lower you might see the price of your car insurance policy drop. This is thanks to the no-claims discount. No-claims discount cover protects that discount — if you get in an accident or have another insurable event, no-claims cover allows you to get the incident covered without losing your no-claims bonus. But whether this extra is worth it depends. Check what the cost is for the cover as well as how much you’re actually saving from your no-claims bonus.
  • Car key cover – It can be a little shocking how much replacement car keys can be. RAC has reported that lost car keys cost us £180 million per year! Car key insurance covers you in case your keys are lost or stolen. This insurance could save you the £176 average cost for a new set of keys (according to RAC).

Other coverages worth considering include legal protection cover (to help offset the cost of solicitors and other legal costs), wrong fuel insurance (in case you accidently put petrol in your diesel engine, for example), and hire car cover (to provide a replacement hire car should yours be undrivable for a time).

How much does insurance cost?

According to the Association of British Insurers (ABI), the average premium paid for comprehensive motor insurance was £484 in the last three months of 2019.

That can provide you with a sense of how the auto insurance rates you see compare with the rest of the country. But remember, that’s just the average cost of car insurance. If you are a particularly experienced driver, are middle aged and have a long history of no claims, your premium could be quite a bit lower than average.

On the other hand, if you have a history of claims and are a young driver, or a much older driver, your insurance cost could be much higher. In fact, the site Statista listed the average car insurance cost for young drivers (aged around 20 years old) to be £851, while premiums for those around 75 average £752.

The message here is to take notice of average rates, but make sure to compare car insurance rates across multiple comparison sites. That’ll help you see insurance quotes that are based on your information and background, rather than the very broad average.

Frequently Asked Questions

Car insurance protects you from financial loss if you’re involved in a car accident. Your insurer will compensate other people for injury or damage done to their property caused by you. If you have comprehensive coverage, the insurance also covers damage to your car. Some policies will also pay to repair or replace your car if it’s stolen, vandalised or written off.

In most cases, you’ll be able to add extra features onto your policy to give yourself even greater protection -- popular additions include breakdown cover, windscreen cover, and legal expenses cover.

Comprehensive cover is the highest level of car insurance you can buy. It compensates third parties for injury and damage and also pays to repair or replace your car too – even if an accident is your fault. Alternatively, you can opt for third party only cover, or third party, fire and theft. To find out more about typical features and benefits, take a look at our guide to the types of car insurance in the UK.

In short, yes. Car insurance is a legal requirement in the UK; if you don’t have cover you could be given a fixed penalty, have six points added to your licence and even be taken to court and given a driving ban.

A typical car insurance premium for a comprehensive policy comes in at just under £500. However, the cost can vary depending on a number of factors, which you can explore in our guide to the average cost of car insurance.

Car insurance provides a financial safety net if things go wrong, so whatever you choose should provide you with a level of protection you’re happy with. That said, there are ways to lower the cost. For example, paying for your policy in one go, rather than monthly, or buying a car that’s less expensive to insure, can lower the cost of your premium.

Searching for car insurance is considered a ‘soft search’ which is primarily done to confirm your identity. Soft searches don’t affect your credit rating and shouldn’t show up on your credit report. However, if you decide to pay for car cover in monthly instalments, insurers will run a ‘hard search’ against your credit history, which will show up on your report. Missed insurance payments will also appear on your record and could have a negative impact on future credit and loans.

Yes, you can but depending on when you cancel, there could be a penalty cost involved.

When you take out a policy, you have a 14-day cooling off period, which means you can cancel for any reason during this time. If you cancel within the cooling off period you won’t be penalised, but you should still expect to pay for any days that the policy was active; there may also be an admin fee. If you decide to cancel part-way through the year (for instance if you sold your car) you can still cancel but you could be charged a cancellation fee (in addition to an admin fee) but this should be made clear in your policy documents.

The cost of car insurance depends on a range of factors including the type of job you do and the number of miles you drive. Some factors such as age can have a huge impact on premiums and car insurance for young drivers in particular can be significantly higher than average.