The importance of comparing car insurance policies

Car insurance is a legal necessity in the UK but that doesn't mean you have to pay over the odds for it. If you've stuck with the same provider for several years then chances are you're paying the price for your loyalty as most car insurance companies offer their cheapest deals to new customers.

In this guide we look at why comparing car insurance quotes is so important and how to keep your premiums in check.

Why should you compare car insurance quotes?

In January 2010, the AA British Insurance Premium Index revealed that there had been a steep rise in the average quoted premiums for car insurance. Annual comprehensive car insurance premiums rose over the final quarter of 2009 by 7.2 per cent to £1,000; while third party, fire and theft premiums increased by an average of 8.9 per cent to £1,252 - notably average premiums for third party, fire and theft cover are higher than those for comprehensive cover because these policies are typically bought by younger drivers and drivers for whom comprehensive cover would be too expensive (such as those with claims or convictions on their record).

With car insurance premiums increasing - primarily due to a significant rise in personal injury claims and accidental damage claims - it's become vitally important to ensure you're receiving a competitive deal.

The same Index also revealed an average of the three lowest quotes received by customers based on a basket of risks to illustrate the savings that can be made by shopping around. Average comprehensive car insurance quotes among those who shop around stood at £613 - a saving of nearly £400 a year; while average quotes for third party, fire and theft car insurance stood at £788 - a saving of more than £450 a year.

So how can you compare car insurance quotes?

Unfortunately, many drivers are complacent about their car insurance cover and assume that the process of comparing car insurance premiums is time consuming.

However, there are now a host of comparison websites that make the task straightforward. The leading comparison websites can compare deals from as many as 120 insurance companies with a single search - all you need to do is fill out an online form honestly and it will do the work for you, retrieving quotes from the companies in its listings.

Even if you have used a comparison website in the past and have found a cheap deal, you should still take the time to shop around each year. This is because insurers usually increase premiums annually at renewal time. However, by shopping around you could take advantage of introductory discounts that are only offered to new customers.

Is there anything else to bear in mind?

While shopping around to find the cheapest quote is sensible, don't fall into the trap of assuming that the cheapest deal is always the best. You should still compare the levels of cover available to ensure you're receiving value for money.

Remember that insurance policies can differ widely between providers and what is offered as standard by one company may not be included in another policy. Some of the features you may wish to look out for include: accidental damage cover; windscreen cover; medical expenses cover; cover for personal belongings; and a courtesy car while yours is repaired.

Also consider the optional extras available - these are cover features for which you must pay an additional premium. Typically these can include legal expenses and breakdown cover. If you plan to take your vehicle abroad then consider the level of cover you will have on the continent - many insurance companies downgrade comprehensive policies to third party cover only while you are travelling in the EU, while others will offer the same level of cover that you enjoy at home. So pay attention to the terms and conditions of the policy.

Look out for policy exclusions - these are circumstances in which you will not be covered - and also pay attention to the excess, as this is your contribution towards a claim - the higher the excess, the more you will pay if a claim is necessary.

Are there other ways to lower car insurance premiums?

Remember that car insurance companies base their premiums on risk - meaning the more likely you are to make a claim, the higher your premiums will usually be. As such, taking steps to lower this risk will usually lower premiums - here are some suggestions:

• Agree to a mileage limit: The fewer miles you drive, the less likely you are to be in an accident and so a mileage cap could lower your premiums.


• Avoid convictions: Two or more speeding offences could cause your car insurance premiums to leap by as much as 74 per cent, so stick to the rules of the road.


• Choose your car carefully: Generally, older vehicles with smaller engines qualify for cheaper premiums as older cars cost less to repair/replace and vehicles with small engines are less likely to be driven at excessive speeds.


• Increase security: Consult your insurer about which security devices it recommends as alarms, immobilisers and tracking systems could earn a discount.


• Increase voluntary excess: The excess is normally split into a compulsory excess set by the insurance company and a voluntary excess, which is an additional amount you agree to pay in case a claim is ever necessary. Increasing this voluntary excess could lower premiums although you should be careful to keep it at an affordable level.


• Park safely: Store your car in a garage overnight and in a secure car park during the day, where it is less likely to fall victim to car theft.


• Pay annually: You may be able to avoid interest charges by paying premiums annually.

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