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5 ways to beat the insurance premium tax hikes

Cut the cost of car cover despite the surge

Car insurance

Motorists will face higher insurance premium tax (IPT) rates from November 1, but there are steps you can take to cut the cost of cover.

Insurance premiums are currently taxed at 6% but the increase, announced by Chancellor George Osborne as part of the Summer Budget, will see the levy jump to 9.5%. The tax will add an average of £12.25 to comprehensive motor cover, according to the Association of British Insurers.

The rise is a further blow for motorists with the cost of car insurance already on the rise. According to AA research published in October, the average cost of a comprehensive policy is £569 – an increase of 9.2% in the past year.

Find out more: Best and worst car insurance – which insurers are rated as Which? Recommended Providers

Cutting the cost of car insurance

Despite the increases, there are still many ways to reduce the cost of your car insurance. 

1. Use comparison sites to get a number of quotes

Comparison sites can help you sniff out the best deals but they are not always 100% reliable. Make sure you double-check the policy you’re interested in has everything you need.

2. Choose your occupation carefully

The job categories that insurers use to price your cover can be broad and many motorists could save money by describing their occupation differently. 

For example, describing yourself as a housewife or a househusband instead of as unemployed can help reduce your premium. 

It’s worth experimenting to see if a different job title affects your premium, but you should never lie about your job. Don’t say you’re a butcher if you’re a baker. This is considered fraud and you could be prosecuted.

3. Avoid modifying your car…unless you are increasing its safety

Even a small modification to your car, such as new alloys, can cause your premiums to shoot up. Any changes should be discussed with your insurer first.

However, any modification that increases safety – such as installing an alarm, tracker or immobiliser – can help you cut costs.

4. Pay for your cover annually (if you can afford to)

Paying for cover on a monthly basis is the same as taking a high-interest loan from your provider, with the APR sometimes as high as 40%. Some insurers will also charge you a fee for setting up a monthly payment plan. Pay annually, however, and you could save up to £100.

5. Avoid auto-renewal and haggle

Insurers reserve the best deals for new customers and often push up the premiums for loyal policyholders. Rather than just allowing your policy to roll into another year, shop around and see if you can find yourself a lower premium. Even if you want to stay with your provider, you can use this as a platform to haggle.

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