Is the cost of motor insurance falling?

Reports out this week from Sainsbury's Bank have shown more than a 3% drop in the average cost of a motor insurance policy in the second half of 2009.

This is great news for motorists who are now looking to renew their motor insurance and should now be able to get their renewal at a cheaper rate than they were offered last year.

However, this good news could be short lived; in part thanks to the recent spell of extreme weather the UK experienced, which bought most of the country to a standstill. Those who were able to get onto the roads were finding themselves in some of the most treacherous conditions we have experienced for several years and unfortunately such conditions led to many people hitting fences, walls or at the worst other cars, fortunately most accidents in these conditions were only minor bumps.

Many insurers will have seen the level of claims being made over the last couple of weeks increase, some have reported as much as a 40% increase, based on the same period last year. Once the cost of these claims has been accounted for there's a strong likelihood of the average premium increasing rather than going down.

Although this initially spells bad news for the nations motorists, there are a number of ways you can save on your premium. Firstly in the short term; if your policy is due to be renewed within the next month then if you get a quote now! It will still be valid for 30 days up to 60 in some cases, meaning as long as your circumstances don't change, then your premium is guaranteed for a month regardless of any changes which may take effect in the market.

Longer term it's important to shop around for insurance on an annual basis, although be aware that what is included in your current policy may be a chargeable extra on any new policy, so when shopping around make sure it is always on a like basis as many "cheap" motor insurance policies will not include any extras such as courtesy car cover, or legal protection.

To help you get the best possible premium when searching for car insurance, Moneyextra.com recommends you follow our tips below:

• If you have a garage use it - some insurers will give a discount for keeping your car in a garage when it's not in use rather than it being left on the driveway or an open road.
• Fit an alarm and immobiliser if your vehicle doesn't already have one, the greater the security the less likelihood there is of anything happening to your vehicle and again this will lead to a reduction of up to 2-3% of the premium.
• Younger drivers may want to consider adding an older parent/relative to their policy. Some insurers will provide a discount if there is an older driver on the policy
• Be accurate when calculating your annual mileage, you may not do as many miles as you think, for example someone who only does 8,000 miles a year but tells their insurer 12,000 could actually end up paying 5% more than necessary. However, be honest with mileage when buying your policy as any false declarations may lead to a claim being declined.
• Take into account any change in your circumstances. For example, since your last renewal you may have retired or no longer require your car for commuting. Not only does this give the potential benefits of reduced mileage but also the addition of commuting on a policy may not be required now. Such a change could lead to savings of up to 10%.
• You may want to consider a higher voluntary discount as by selecting £500 instead of £250, our research shows your premium could be reduced by as much as 10%. By opting to pay a higher amount yourself in the event of a claim you're sharing the risk with the insurer who can pass the savings back to yourselves.
• Look at what is included in your policy. Many will pre-select options such as legal cover which you may already have separately and could be costly adding another £20-£30 to your premium, likewise the option to add on motor breakdown cover may be there, in most cases this can be bought cheaper again as a separate product. Check your bank account or credit card to avoid any duplication of insurance. Some premium bank accounts offer legal protection and breakdown cover as part of standard offering.
• Finally, be mindful when protecting your no claims discount, it's a common mistake to assume that by having this extra cover you are protecting your premium from any increases in the event of a claim, when in fact you are protecting the % discount your insurer gives you and if you make a claim you can still expect your premium to increase. Typically the cost of protecting no claims is around an extra £15-£20.

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Moneyextra.com recommends you take independent financial advice before acting on any article

2009-02-17 14:28:08 © Moneyextra.com