Four simple steps to cut the cost of car insurance

If you are about to renew your car insurance, prepare for a shock. The average comprehensive car insurance policy now costs more than £1,000 a year. Premiums rose by 7.2% in the last three months of 2009. That’s the biggest rise on record, according to the AA’s British Insurance Premium Index, and it also means that policies rose by 18% over the year in total.

So what’s going on? It seems that premiums are shooting up partly because of an increase in the number of fraudulent claims and partly because of a rise in the number of personal injury claims. But the scale of the increases is also down to a change in business practices. Insurers used to be happy to keep initial premiums low in order to attract new customers, but “with increasing costs, that tactic is proving unsustainable”, says Will Thomas, head of car insurance at So insurers are now increasing premiums for everyone.

All this means that you have to shop around. Don’t automatically accept the renewal offer made by your existing insurer – it is highly unlikely to be the cheapest deal you can get. Instead, visit comparison sites such as, or, and see what other insurers are offering. If you find a better deal, call your insurer and tell them about it. If they don’t match it, take the new deal.

Next, cut your premiums by changing the amount of excess you are prepared to pay if you make a claim. You don’t want it to be so high that you are financially crippled if you have an accident, but nudging it up from £50 to £100 can make a big difference to your premiums.

Also make sure your car is secure. Insurers base their premiums on how big a risk you are. So try to keep your car in a garage or in off-street parking and make sure it is fitted with an alarm and immobiliser.

Finally, pay your car insurance annually. Unlike utility and telephone bills, where you are often rewarded for paying monthly by direct debit, with car insurance you will be penalised. So if you can afford to pay for your insurance in one upfront payment, do so. If you can’t afford to do this, consider paying on a credit card with 12 months 0% interest on purchases. That way you can spread the cost without paying a surcharge.

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