Why has car insurance gone up and what can I do to cut costs?

DRIVERS are finding it difficult when it comes to insuring their cars as another blow to those struggling with high prices.

Food, energy, and other essential expenses are skyrocketing and many of us are tightening our pockets.

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Another reason people find it difficult is car insurance, which is also on the rise.

Data from the Association of British Insurers (ABI) shows motorists who bought insurance in January, February or March paid £478 on an annual policy on average.

That means premiums are up 16% year-over-year – faster than inflation.

Car insurance costs have risen to their highest level since Q4 2019, when drivers paid an average of £483.

Comparison Market analysis shows that premiums have increased for all motorists – an average increase of £105 a year.

And according to Office for National Statistics (ONS) data, car insurance far outstrips CPI inflation, at 43.1% versus 8.7%.

Why is car insurance more expensive?

Insurers blame the pandemic and high inflation.

The global shutdown has caused major disruptions in supply chains and created a shortage of the microchips needed to build new cars.

It constrains supply and pushes up demand for used cars, pushing car prices higher.

Repair costs including materials, wages and energy also lead to higher car insurance premiums.

How can I cut my car insurance?

If you’re struggling with your car insurance, there are things you can do

Save date

Knowing the exact date to renew your car insurance can save you some cash.

That’s because your insurance will most likely get more expensive the closer you get to the renewal date rather than a little earlier.

Ryan Fulthorpe, car insurance specialist at Go Compare, says you can purchase premiums up to 29 days before the policy start date and “lock in” your offer on that day.

The closer you get to your contract renewal date, the more money you’re likely to spend.

He said: “Go Compare data shows that the closer to the renewal date, the more you are likely to pay.

“Our customers saved an average of 44% more by purchasing their car insurance 27 days before their renewal date, compared to those who renewed within the day.”

So if your policy is ending on August 1st, for example, you should consider renewing it on July 5th before costs start to rise.

With an average cost of renewal premiums of £436 at the start of the year, using this trick could save you over £191.

However, be sure to compare costs to find the cheapest deal.

Pay annually if you can

Paying your car insurance every year can save you money because you won’t have to pay interest.

Short-term car insurance provider Cuvva found that a young driver could be charged around £5,278 on an annual bill with Churchill, but £5,806 monthly, with an interest rate of 29.40%. That’s a savings of £527.

If you can afford it, prepay your insurance.

Of course, make sure you can make the payment in full, and if you use a credit card, make sure you can pay it back on time to avoid the risk of interest added.

Improved security

If your car is stolen and you have to make a claim, your insurance premium will go up.

Improving your car’s security can prevent theft from happening in the first place.

Bicycle locks, alarms and immobilizers can deter robbers.

You can prevent your insurance from going up by a third, saving you money in the long run.

A third of insurance could be between £100 and £1,000 but a bike safety lock will set you back between £30 and £133.

Check your work

Another way that insurance costs can be affected is how you explain your occupation in your application.

Go Compare found that swapping your role from “builder” to “construction worker” could save you £5 a year.

Tweaking “chef” to “supplier” could save you £20.

Changing your role from ‘fast food driver’ to ‘delivery driver’ could save you £40. Make sure the description is still accurate though.

More experienced drivers

According to BrakeOne in five drivers is involved in an accident within a year of passing their test and more than 1,500 young drivers are killed or seriously injured on UK roads each year.

Insurance companies often charge higher premiums for younger drivers for this reason, because they are considered more risky to cover.

But you can add another person to your premium, such as a parent, and significantly reduce the premium you’re quoted.

“It’s not always the case, but adding a driver to your car insurance policy can reduce costs,” said Kara Gammell, financial expert at comparison site MoneySuperMarket.

“This is often helpful for younger drivers, especially for those who have just passed the test and are considered ‘high risk’ by insurers.

“Adding someone with more driving experience, no previous claims and considered a much lower risk can reduce the average risk, meaning you could be offered a policy cheaper – in some cases this can save you £100.”

While adding a named driver to your policy is a great way to cut costs as premiums go up, you’ll want to stay away from “going ahead”.

This is the term car insurance when someone, usually a parent or an older driver, falsely claims that they are the primary driver of the vehicle while it is either a younger or inexperienced person. more experience.

Kara warns: “Policies for young drivers can be very expensive, so it’s easy to see why going ahead is appealing.

“However, it is illegal and if an elderly driver identifies himself as the primary driver, the insurance policy could be void and the driver could even be criminally charged.

“Regardless of the situation, check to see how much the administrative fees can be to add a named driver and how much more they will have to pay if they need to make a claim.”

Do I need car insurance?

It is a legal requirement if you own and drive a car.

Auto insurance offers you financial protection if you are in an accident, with three different levels of coverage.

You can choose from a comprehensive, third-party or third-party policy, a fire and theft policy.

A full insurance policy is the highest level of protection and covers you, your car, and anyone else involved in an accident – what makes them the most expensive.

The lowest level is third party, which is the legal minimum you must have.

It covers you for the costs of injury or damage caused to others or their property.

However, you do not get any protection if your vehicle is damaged or stolen.

You can pay your car insurance in lump sum 12 months in advance or in monthly installments.

The insurance companies will then reward you if you don’t claim within this time period by, generally, reducing your premiums for the next 12-month period.

This is called a “no claim bonus” and can see your premiums drop 30% after one year to 65% or more after five years.

That said, many drivers are still seeing their premiums go up in recent months despite no claim or change in circumstances.

This is because, among other factors, rising energy inflation and vehicle repair costs are passed on to consumers.

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