Understanding Car Insurance Excesses
The cost of motor insurance often represents one of the largest payouts you’ll make for the privilege of owning a car. Unfortunately, it doesn’t look likely to get better any time soon. A recent survey found that the average cost of car insurance premiums in the UK is now £514.38 – the highest figure since records began in 2005, and an increase of 5.8% over last year . Of course, there are ways of reducing your premiums, but these can involve making concessions about who is able to drive your car (cutting out named drivers, for example), having a mileage limit placed on your vehicle, or fitting additional safety devices such as a an industry-standard alarm. For whatever reason, these measures may not be suitable for your insurance needs. But what can you do? Having a larger excess on your car insurance is one of the easiest ways to save money on your premiums.
An excess is defined as the amount you have to pay before your insurance kicks in. Let’s say, for example, it’s set at £100. You pay the first £100 of any claim you make, and the insurance picks up the rest of the bill. This works out great for any major damage – if you write your car off and it becomes unfeasible to repair it – but means that you’re less likely to claim for small damages. If you’re involved in a minor incident that’s only going to cost £150 to repair, you’re not likely to cash in your no claims bonus for the sake of the £50 you’d get from the insurance company (as you’re still liable for finding the first £100 yourself).
If you choose to have a larger excess on your policy, your insurance provider will likely offer you a discount on your cover. This is because you represent a lower financial risk to the insurance company, even if you’re still a relatively high risk in terms of your age, gender, or history (in fact, the riskier you are, the higher an excess your provider will generally insist on before they’ll insure you anyway). If you crash while you have a high excess, the insurance company isn’t liable for as much of the repair bill, and so is no worse off as a result.
However, while it might save you money, it’s important to note that paying the excess is a prerequisite of getting your car repaired. If you can’t afford to meet the bill, you won’t be driving anywhere for a while, as you won’t be able to make the claim. As such, it’s absolutely crucial that you don’t get an excess on your policy that’s higher than you could legitimately expect to repay in the event of an accident or other damage to your car.
While car insurance excesses can be a great way of manipulating your premiums in your favour, don’t be fooled into thinking that it’s an easy solution to every high insurance fee. You can end up getting burned pretty badly if you overestimate your ability to pay, especially if the damage is only minor, but at the same time you can save yourself quite a bit of money.
Short guide to motor insurance
Motor insurance is a legal requirement in the UK, but the market is still an extremely broad one thanks to a large number of providers. Your policy will be dictated to an extent by the type of car you drive. Someone who has a high specification brand new Mercedes’ costing £100,000 is usually going to pay more than somebody driving a very old Rover, no matter what their age, but by following a few simple tips people can at least keep their costs to a minimum. There’s also a galaxy of add-ons and extras out there, which when compared like for like, can help someone to get a better deal.
A car insurance policy itself comes in three basic levels. Third party only is the minimum legal requirement, and only pays out for damage caused to someone else’s vehicle in an accident. Third party fire and theft does the same but also covers against, as the name suggests fire and theft, and fully comprehensive covers against just about any realistic threats to your car you can imagine.
Third party only might seem somewhat extreme and threadbare, but it can be relevant for people who have a car of a very low value. Car insurance policies also come with excesses, which are initial amount you agree to pay in the event of making a claim. So an excess of £400, means the driver will have to pay £400 towards the cost of any repair bill of around £1000, to give an example. Imagine your car is only worth £1,000, with an involuntary excess of £400. This means you can only really claim for £600 worth of repair costs from your insurer - depending on premium costs, you may only want third party in such a circumstance. Of course, at the other end of the scale, an older driver who has a brand new BMW worth £20,000 pounds may decide fully comprehensive is the best option for them.
Car insurance is widely available and can be picked up from high street insurance companies, specialist motor providers, and even supermarkets. Shopping around is often the best option as quotes can vary wildly. Remember all insurance companies calculate risk and what they charge you is based on how likely they think you are to make a claim. Therefore anything which reduces the likelihood could help your policy also go down.
Buying and using a steering lock, installing an effective alarm, immobiliser and even a tracking device could significantly affect your premium. Where you live is also important as areas which have a history of high car crime and vandalism understandably attract higher premiums. A simple way around this is to park your car on a drive or garage if you have access to one. Keeping a vehicle off the public highway is always seen as making it less likely to be damaged or broken into.
Motor insurance policies can also come with things like breakdown cover included. The quality of this will vary and things to look out for when comparing include whether or not it features a home start option, and recovery to the nearest garage. It is also worth looking at what its options are for travelling abroad. Those who like to motor on the continent or in Ireland may want to find something which covers them when on holiday.
Your motor insurance should also provide you with adequate cover for things which might be stolen from your car. Those who perhaps carry expensive laptops in the boot due to business reasons may want to make sure the level of potential payout is sufficient.