Your Complete Guide to Car Insurance

Your Complete Guide to Car Insurance

Car insurance is another payment drivers know they must accept, but we all always wish the cost was a little lower. Even with years of avoiding mishaps on the road the price of car insurance still seems to be rising.

Here is Rivervale'sGuide to car insurance, covering the latest news, the meaning of those numbers and letters, what a black box does and how to keep your payments as low as possible.

It has been against the law to drive without car insurance since the 1930’s. The consequences of doing so are a fixed penalty fine of £300 and 6 points on your driving licence. If your case goes to court the fine you could receive is unlimited and you risk being disqualified from driving. You could end up even losing your car as the police now have the power to seize and destroy cars being driven without insurance. This still hasn’t stopped around 1 million drivers on our roads driving with no valid insurance.

Latest Car Insurance News

We knew before the year began that 2017 was going to be the year the cost of car insurance rose, due to two main changes.

  1. Back in the Autumn Statement of 2016 Phillip Hammond announced Insurance Premium Tax was going to rise by 2% from 10% to 12%. The effect of this change is around an extra £10 on each insurance policy. This change took affect from June 2017.
  2. Justice Secretary, Liz Truss announced changes to the discount rate which is used when calculating lump sum compensation payments including but not limited to payments in car insurance claims. The new rate means victims will receive larger lump sum payments. If car insurance companies are paying out more in compensation, they will recover these costs by increasing the price of car insurance. These changes took effect in March 2017.

The impact on prices has been seen already. In the last quarter of 2016 the average car insurance policy cost £737, at the end of the June 2017 the cost of the average policy had risen to £847.

Rivervale’s Top Tips to Keep Your Car Insurance Payments Low

There are several factors which will affect the cost of your car insurance.

  • Age – Younger drivers are more often involved in accidents so the price of their insurance is higher as they are seen as more of a risk. Younger drivers have also not had the time to accumulate years of no claims to prove they are not a risk and reduce payments.
  • Car – If you choose a sporty, highly desirable or particularly powerful car then expect to pay more on your car insurance as these types of vehicles are seen as a higher risk.
    Location – if you live in a built up area or an area known to have high levels of crime your car insurance is likely to be higher.
  • Car Use – if you cover a low number of miles each year then your car insurance is likely to be lower than somebody who drives a lot. The more you are on the road the higher the chance of becoming involved in an accident.

Reducing the Cost of Your Car Insurance

  • Always compare quotes. Many insurers will automatically renew your insurance policy for you unless you tell them otherwise, this is often not a competitive price. When you receive your renewal notice make sure you shop around for the best price. 
  • Check your job title. If your job fits into many categories check them all when you compare. A ‘Music Teacher’ for example may pay more for their policy than a ‘Teacher’. 
  • Pay in one instalment. If you can, it is always better to pay for an insurance policy in one payment. Interest is added to the cost of your insurance when you spread the cost using a monthly direct debit, so you will pay more for the exact same product.
  • Protect your no claims. If you have managed to accumulate several years no claims bonus then it is best to protect them. This will increase the cost of your policy slightly, but a no claims bonus can reduce the cost of your policy by up to 90% with some insurers.
  • Check who is on your policy. Limit the amount of additional drivers to only those who regularly drive the vehicle. Be wary of adding new drivers as it will increase how much you pay. Insurers are now also cracking down on parents who put themselves down as the main driver on a child’s policy to reduce the cost in what is called ‘fronting’. 
  • Consider a ‘black box’. Insurers will install a telematics device to your vehicle to monitor driving. It will assess whether you are on the road at the busiest times as well as how safely you drive. For new drivers, this is a way of significantly reducing costs by proving you can drive safely before building up years of no claims.
  • Choose your vehicle wisely. Sporty or premium vehicles will have a higher insurance cost, as will those will many modifications.
  • Check your mileage. Make sure the mileage claimed is accurate, if you are travelling fewer miles than on your policy you will most likely be paying more.
  • Check which usage you have selected.  If you do not use your car to travel to work or for business purposes let your insurer know and your premium may reduce.
  • Check the extras on your policy.  If you do not need windscreen cover, legal cover and a hire car, make sure they are not included on your policy as you will be paying more for them. 
  • Improve Security. Most new cars now come with and alarm, immobiliser, and tracking device, make sure your insurer is aware if your vehicle has these. The better the security the better the chances of reducing your car insurance bill. If your vehicle doesn’t have these safety features it may be wise to invest. If you have a garage, clear out all the boxes and use it for your car! Insurers view a vehicle locked in a garage as more secure than one parked on the road overnight so may charge a lower premium.
  • Voluntary excess. Check how much the voluntary excess is set to on your policy. If you can, increase the voluntary excess to reduce your costs. If you have a non-fault claim this excess can normally be claimed back.
  • Drive within the law.  If you are caught speeding, talking on your phone or drink driving you could be endangering the lives of others and are likely to receive points on your licence.  Those who have accumulated a few points on their licence are seen as riskier drivers than those who haven't so are likely to face higher insurance costs.

Read More: The Speed Awareness Course and Your Insurance

Car Insurance Groups Explained

Each vehicle is assigned a group, expressed as a number, which influences how expensive car insurance will be. The first insurance groups were introduced in the 1970’s and ranged from 1-9, in 1992 this range was increased to 1-20 and more recently in 2006 the range increased to 1-50. Cars in the lowest groups are the cheapest to insure and those in group 50 are the most expensive.

These groups are decided by a panel of experts called the Group Rating Panel who include representatives from the insurance industry and is largely based on information provided by the Motor Insurance Repair Research Centre (Thatcham). Decisions are based on the following factors:

  • Repair time – the availability of parts, who can fit them, how long repairs take and cost are all considered here. If your vehicle has specialist parts that require specialist fitting then a higher group is likely to be assigned.
  • Parts Prices – A list of 23 parts common across manufacturers are compared and those with higher costs will be awarded a higher category.
  • Vehicle Value – The cost of a vehicle at new will affect which insurance group it is placed into. A car with a higher value is likely to be in a higher insurance group.
  • Performance – Cars which are seen as high-performance due to powerful engines, high top speeds and fast acceleration are going to be seen as higher risk so will be placed in a higher group.
  • Security – Any features which lessen the chance of a vehicle being stolen such an immobiliser or alarm will increase the chances of the vehicle being placed in a lower insurance group.
  • Safety – Features that improve the safety of a vehicle are considered. Systems such as Autonomous Emergency Braking which reduce the chance of a forward collision may benefit from being placed in a lower insurance group.

After the numbers of an insurance group a letter appears, the table below shows what each letter represents.

Letter Element of Insurance Group Meaning

 E This signals the vehicle has exceeded security requirements for the type of car  
 A A vehicle with A in its insurance group displays an acceptable level of security 
 D A 'D' rating would mean the vehicle has not met security requirements expected for the type of car 
 U This rating would show the vehicle in question has an unsatisfactory level of security 
 P A vehicle would be given a 'P' rating if there was not enough data available at its launch for a decision to be made - this rating would be amended once sufficient information became available 
 G A 'G' stands for a Grey Import.  Only cars which are officially sold in the UK are classified for insurance purposes.  If a car not for sale in the UK is imported in, it is up to the individual insurer to decide on the price 

So, a car that would be in group 5 but is awarded an E for excellent security features may be placed in group 4E, alternatively a group 5 car which has poor security may move up a group to 6D.
Car insurance groups are intended as a guide only and insurers are able to apply their own ratings if they so wish.

What is a Black Box?

For young or new drivers, the cost of insurance can often be extremely high. New drivers have no way of proving to insurance companies they are a low risk driver, as they do not have any years of no claims. In response to this problem, many insurers now offer drivers the opportunity to have a black box fitted.

A black box is a telematics device which is fitted inside your car and will use GPS to monitor your driving habits and behaviours such as; times you are driving, speed, braking, the types of roads you are using and mileage. The data is then collected and if you have been driving sensibly and safely your insurance cost could go down. Many insurers offer drivers the chance to see their data on a secure site where they can monitor their own performance and receive tips to improve their driving in the future.

This type of insurance could provide savings to new drivers, especially those who are driving few miles, cautiously, during the day.


What do think of current car insurance prices? Do you think more should be done to reduce the cost?

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