The cost of insuring your motor

According to the AA, it now costs more to insure your car than ever before. The AA British Insurance Premium Index reveals that in the last three months of 2006 the average premium quoted for a comprehensive car insurance policy jumped by a massive 4.35% to nearly £806.

Comprehensive car insurance premiums are now almost double the average quoted in July 1994, when the index was launched. The previous highest average quoted premium was £777.57, in January 2004.

"Since then, competitive activity led to a falling trend despite the fast rising cost of both accident damage and personal injury claims, says Kevin Sinclair, managing director of AA Insurance, "Other insurers are now following Norwich Union's lead and have increased premiums to more realistic levels, given that the cost of claims is rising at about 6% per annum and this is reflected in the index."

Looking for a new policy?

If you are looking for a new car insurance policy be aware that there can be hundreds of pounds difference between the cheapest and most expensive premiums quoted. Also, your renewal quote from your existing insurer may not be the cheapest, so shop around before you commit to anything.

Direct insurers and brokers can ask drivers up to 70 questions before quoting and factors such as your age, gender, job, marital status, where you live, the type of car you drive, where you park at night, how many miles you do each year, your driving history and how many accidents you've had, all affect the premium you'll be quoted.

How to keep premiums down

There is little you can do about your age or gender, and changing your marital status (married people are deemed safer drivers) to get cheaper car insurance might seem a bit extreme, so what can drivers do to keep premiums down?

First of all, drive a low risk car. Cars are given an insurance group ranking based on the level of risk involved with each car type and group (often based on likely repair costs). Generally, high-powered performance cars will be in the highest group, whereas a small car will be generally lower ranked and therefore should receive cheaper car insurance. So ditch the Ferrari with the souped-up engine and get behind the wheel of a nice little Ford Ka or Micra.

29 March 2007 © Moneyextra.com

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Our senior editor Robin Amlôt recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.