10 car insurance traps

All drivers are legally required to have car insurance, but many people resent what can be a hefty annual expense. The good news, however, is that you can keep costs to a minimum by avoiding some of the most common motor cover traps.

From sticking with the same provider year after year to failing to check the excess, here we highlight 10 motor insurance traps which all drivers should steer clear of...

Trap 1: Thinking that loyalty pays

Many drivers assume that, if they stick with the same insurer year after year, they'll be rewarded for their loyalty with lower premiums. On the contrary. Insurers thrive on our apathy and can bump up premiums each year, even when no claim has been made.

The best quotes are usually given to new customers, so the chances are you'll be offered a more competitive deal if you shop around for cover every year. And even if your existing insurer offers you a lower price than last year, you could probably still save by comparing what else is on offer. So the message is simple: DON'T AUTO-RENEW YOUR CAR INSURANCE!

Trap 2: Buying third party, fire & theft to save money

You might think that, if you buy the minimum level of cover, the premiums will be much lower. But that's not the case - often you can get comprehensive cover for a similar or even lower price than third party fire & theft cover. And comprehensive car insurance will provide you with much greater protection. Again, shop around.

Trap 3: Paying by monthly instalments

Although paying for your insurance cover upfront can seem more painful financially, it is actually much more cost-effective than spreading the cost by with monthly payments. Insurers usually add steep interest charges to instalments which can dramatically increase the overall cost, so if you can afford to pay the full premium at the outset, you should do so.
One option is to pay your premium in one go using a 0% purchase credit card, where you don't pay any interest on your spending for up to 18 months. You should aim to clear the debt within 12 months though, so you're only paying one insurance bill at any one time. It will also mean you avoid a hefty interest rate on the card balance whenever the interest-free period comes to an end.

Trap 4: Assuming all policies are the same

They're not! Always read the small-print of your car insurance policy as cover can vary widely. Make sure the policy you choose suits your requirements. For example, does yours offer a courtesy car in the event your car needs repairs or is stolen? If not, and you don't have another vehicle or sources of transport available, you could find yourself stuck. Same applies to breakdown cover.

Trap 5: Ignoring the excess

If a particular motor insurance policy seems unbelievably cheap, always check the excess, which is the portion of any insurance claim you must pay yourself. A very high excess can mean much lower premiums, but also that you might struggle to afford to make a claim at all, which defeats the point of having insurance in the first place.
The excess has two parts - the mandatory and the voluntary elements. The former is set by the insurer, you control the latter.

Trap 6: Overlooking telematics

Younger motorists generally have to pay higher car insurance costs than older drivers, but they may be able to reduce the cost of cover with a telematics policy. Here, 'black box' technology monitors the driver's behaviour and habits and rewards safe and responsible driving with cheaper premiums. But be warned, if you aren't confident your driving skills are up to scratch, then you're unlikely to see a reduction in costs. And many telematics policies impose limits of 5,000 or 6,000 miles per annum, rendering them impractical for many drivers.

Trap 7: Not insuring your car because you never drive it

It is a legal offence to keep a vehicle without insurance unless you have notified DVLA that your vehicle is being kept off the road by means of a Statutory Off Road Notice (SORN). You don't have to be driving to be caught. Even if it never leaves the garage, you either need insurance or you need to file a SORN.

Penalties for transgressing this law include a fixed penalty of £100, your vehicle being clamped, seized and disposed of, and a court prosecution with a maximum fine of £1,000.

Trap 8: Trying to save money by putting a parent as the main driver

Falsely declaring another person is the main driver of the vehicle when they aren't is illegal. It is known as 'fronting' and can not only invalidate your insurance but can lead to a fine and penalty points on your licence, so it should be avoided at all costs. However, you can add a more experienced person as a named driver on your policy to help reduce premiums.
This tactic works for pretty much any driver because the insurer assumes the risk of an accident or theft will be reduced if more than one driver has access to the vehicle.

Trap 9: Making unafforable modifications

Tempting as it may be to fit alloy wheels or the latest stereo system in your car, making modifications can have a major impact on your insurance premiums - simply because the vehicle is no longer its original spec. Speak to your insurer if you are planning on making any changes to find out whether it will bump up the cost of cover.

Trap 10: Assuming all policies cover European driving

Millions of people take their cars abroad each year, but not all insurers include European cover in their policies, which could leave you high and dry if you have an accident while you're abroad. Check the small print of your policy before leaving British shores and, if in doubt, check with your provider. If your policy doesn't include European cover, you may be able to add it in return for an extra premium.