Car insurance - part 1

Posted by Sharon Yewen in Personal Finance on 17 September 2012 - Sharon is Financial Controller at checkmyfile.

We all know what it’s like when that time of year comes around when we need to renew our car insurance. How much will it be and how are we going to pay for it?

We often find that the renewal quote has increased dramatically since last year even though we haven’t made a claim.

But don’t fall into the trap of blindly renewing it because it is easier – by shopping around it can be possible to save hundreds of pounds.

Comparison websites are obviously a good place to start, but don’t just stick to them as there are some companies which are not on them – keep the search wide. Furthermore, don’t take the initial quote on face value; it is a good idea to speak to the insurer in order to make sure that you do get the right level of insurance. Sometimes they will also offer to beat any like for like quote in order to gain your business.

The next question is how to pay the premium? As we struggle to pay the monthly bills it can be daunting to then be faced with the vehicle insurance.

Also be aware that the change to vehicle insurance law means that we can’t just stop driving the car until we have enough money to pay for the insurance – the DVLA will know and there will be a £100 penalty, the vehicle could be seized and destroyed, and there could be a court prosecution with a fine of up to £1000.

The only way to avoid this is to obtain a SORN (Statutory Off Road Notice) and remove the vehicle from a public road.

The best and cheapest way to pay is by paying the whole premium in one go. This may be all right if the premium is low because for example you are over 25, have several years of no claims bonus and a perfect driving record, but otherwise the premiums could be sky high.

One way to cope could be to save a small amount of money each month to put towards the annual premium. Or you could agree an overdraft facility with the bank which is a relatively cheap form of credit if you pay it back quickly.

Paying by credit card will usually incur an additional fee, but this could be outweighed with a 0% interest on purchases credit card which will give some breathing space. However it is important to pay off the whole balance at the end of the interest free period to avoid unmanageable debt.

Most insurance companies offer the option to pay in monthly instalments but this will add interest to the premium so you ultimately end up paying much more (average 10%).

There are a number of ways to keep the premiums low in the first place:

- Drive less than 12000 miles per year

- Keep the vehicle in a garage or on a driveway

- Build up a no claims bonus

- Place an accurate value on the vehicle

- Downgrade your car

- Increase the insurance excess

- Opt for fewer extras on the policy

- Add a second driver

- Get married (couples are considered less risky)!

- Take an advanced drivers course

- Lower the cover to third party if the value of the car doesn’t warrant fully comprehensive

- Avoid modifications

- Install a car alarm

One way or another vehicle insurance is a necessary evil for all us drivers, but by following a few simple tips it is possible to save a fair amount of money.

Sharon Yewen is Financial Controller at Checkmyfile. She is an FCA and has a degree in accountancy from the University of Exeter. You can contact Sharon at sharon.yewen@checkmyfile.com

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