Car insurance How to buy a car insurance policy

a car alarm

The more secure your car, the lower your insurance premiums

Having a clear idea of the car insurance policy you want is one thing – knowing where to get sufficient cover is another matter altogether. Here we explain what you need to know when buying car insurance.

What matters to car insurers?

Insurers set premiums by assessing your chance of having an accident, the likely cost of repairs if you do have an accident, and the risk of having your car broken into or stolen. They judge these risks according to where you live, your age and occupation, and where you keep your car overnight, for example.

Some insurers will also take other factors into account, such as your marital status.

What car you drive is a key component when it comes to the premium you pay. The Association of British Insurers’ Group Rating Database now rates most vehicles out of 50, with group 50 being the most expensive (they were previously rated out of 20). 

The ratings reflect the growing range of cars on UK roads, and more precisely assess the differences in risk as well as the costs and complexity of repairs. While they don't account for a driver's age, experience and address, they can be useful for whittling down a shortlist of cars.

Different insurers, different quotes

Most car insurers specialise in certain sectors of the market: high-risk or low-risk cars, for example, or people over a certain age. However, it's not always clear who their policies are aimed at so, if you call an insurer who doesn't specialise in covering people with your profile, you may get a very uncompetitive quote.

It's always important to know your car's current market value when getting a quote for insurance and the Which? Car Valuations tool can help. The tool allows Which? members and non-members to tailor a valuation to the car in question, quickly and easily.

Shop around for your car insurance

Vote with your feet

Don't put up with poor customer service and interest rates - switch to a better deal

Most people know you can save money by shopping around for car insurance, but did you know that insurers often hike up prices after the first year? We carried out some research of renewal premiums in the early part of 2012 and found that the average initial renewal quote from insurers was £405, compared to last year's premium rate of £343. However, those that obtained alternative quotes from comparison sites or other insurers ended up paying an average of £332, or 18% less than the initial renewal quote.

Even those that queried the renewal quote but didn't look elsewhere paid £15 less than the initial renewal price on average. Don't be afraid to haggle or play one insurer against another – some insurers will match or even beat your best quote, so it never hurts to ask. If you're faced with a huge premium hike, do your research and challenge your current insurer to be competitive. If they can't or won't, then you'll probably have to switch.

Get quotes online as well as by phone if you can, as internet quotes can be more than 10% cheaper than phone quotes. Don't overstate your car's value, as most insurers will pay only the current market value of your car if it's written off.

Speak to a specialist

Buying car insurance direct from the insurer or from a price comparison site works for most of us, but an insurance broker may be able to offer a better quote for young drivers or those with a high-risk car, such as a sports car. 

A broker is a type of intermediary – someone who arranges a policy with an insurance company on your behalf. They will be able to offer advice on the best cover for you, and should be able to source a quality policy for a competitive price.

You might want to use a broker if you have trouble getting insured direct, or if you find the quotes you're given are too high.

You can find out more about brokers from British Insurance Brokers' Association (0870 950 1790).

Keeping costs down

You can reduce your annual car insurance premiums if you take out a policy with a bigger excess. This is the amount you have to pay towards a claim. Savings vary from one insurer to another, so it's worth shopping around to find a deal that suits.

It's also common sense not to claim for minor damage, as all insurers offer no-claims discounts (though you should still tell your insurer about any damage). The size of discount varies among insurers, but clocking up one year of no-claims usually saves around 30%.

There’s a whole host of ways you can help keep the cost of car insurance down. Here’s a few of the better ones:

Annual payments

Lots of insurers charge you interest if you opt to pay for your insurance by monthly instalments, so pay on an annual basis. We found companies charging anything from 6% to 29%. An average APR of 18% would add around £126 to the annual cost of a £700 premium.

Accurate mileage

Don't overestimate your annual mileage when getting car insurance quotes, and tell your insurer if you drive fewer than 12,000 miles a year or if you don't use your car to drive to work. Which? motoring editor Richard Headland says: 'I saved £45, as my annual mileage has fallen from 15,000 to 9,000 a year.'

Cut out the frills

Some insurers offer basic policies – with no courtesy car, for example – at a lower price. This might be worth considering if you could live without one for a few days (or if you have two cars).

Check the add-ons

Many insurers offer breakdown cover at an additional cost, typically around £65. This might seem tempting at the time, but consider whether you can buy it more cheaply elsewhere. Buying breakdown cover separately can save you money if you shop around.

Add another driver

Adding a second named driver living at the same address may reduce your car insurance premiums if they're experienced and have a good driving record.

Enhance your skills

Further driver training may help you get a discount on your car insurance. Some insurers offer discounts if you take further training, such as the Advanced Driving Test.

Bump up your security

Extra security features, such as an alarm or immobiliser, can cut your premiums. But check first with your insurer whether it offers a discount and, if it does, exactly what devices qualify. Most insurers will give you a discount if you park your car in a garage or driveway overnight, rather than leaving it on the street.

It's worth remembering that since the introduction of immobilsers as standard on new cars (back in 1998), it's become far harder to steal a car, unless the thief has your keys. Unfortunately, crooks have adapted their techniques. Thousands of cars were stolen last year following burglaries and muggings which saw car keys targeted.

Theft from cars is far more common, as these crimes are invariably perpetrated by opportunists. The police advise against leaving your belongings on display or leaving tell-tale signs such as sat nav holders.

After-sales issues

You can change insurer at any time and you'll get back a proportion of the annual premium, but once you've bought a policy you can't cancel without incurring an admin charge. How much you get back depends on how close you are to the renewal date.

If you've claimed on the policy, you won't be able to get anything back. If you cancel, lots of insurers will charge you a fee, which tends to be between £25 and £35, but can be as high as £50.

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