Choose the right car insurance policy

Rachel Robson tells you everything you need to know about car insurance...

When it comes to choosing a car insurance policy, do you always feel a tad confused about what certain words mean and what you should be looking for?

If you do, you're not alone. In fact, according to recent research, almost one in five drivers think car insurance policies are designed to confuse them. And 42% of Brits struggle to understand the terms used in their insurance policy, leaving them uncertain over what they are actually covered for.

So if you are searching for a car insurance policy, and don't know where to start, hopefully this step-by-step guide will help.

Getting started

The first thing to do is shop around for car insurance quotes. You can do this easily using the lovemoney.com car insurance comparison tool. This will enable you to view quotes from several different car insurers at the same time and will give you a good idea about which insurer is offering the best deal.

Beating the jargon

As you start entering your details to obtain your car insurance quotes, you may find yourself drowning in jargon. And while it can be tempting to ignore this jargon and hope for the best, make sure you don't. It's important to understand exactly what it all means as this could be key to getting the best quote possible.

For example, if you are asked how much voluntary excess you would like, this means the amount you can pay towards a claim on top of your compulsory excess. The compulsory excess is the amount you must pay towards each claim and will vary depending on your circumstances, whereas the voluntary excess is, as the name suggests, voluntary. You can generally select how much voluntary excess you want to pay, with a higher excess usually meaning a lower premium.

You're also likely to be asked what the vehicle will be used for - this will vary from social, domestic and pleasure, or social, domestic, pleasure and business. 

Social, domestic and pleasure means you are covered for non-related work journeys as well as journeys to and from one place of work. But if you use your car for work purposes - if you are visiting clients or making deliveries, for example - you need to make sure it's covered for business use.

You will also be asked what type of cover you require - fully comprehensive, third party, fire and theft, or third party only.

Fully comprehensive means you are covered for any damage caused to your car, and other cars that might be damaged by your vehicle if you have an accident, plus injury to yourself or others. However, it doesn't mean that you can drive someone else's car. That said, some insurers will allow you to drive other cars under your comprehensive policy, but only with third-party cover. However, you'll need to check the terms and conditions of your policy, as most insurers limit this cover to emergency situations.

Meanwhile, third party only will cover any claims made by another person(s) for damage caused by your car - but your own car won't be covered. Third party, fire and theft will give you third party cover as well as cover to pay for repairs or a replacement of your car if it's stolen or if it's damaged or destroyed by fire.

Finally, material fact is the information you must give to your insurer that could affect your insurance. This includes whether you have any points on your driving licence or if you have made any modifications to your car, as these could influence the price you pay for your car insurance policy. So make sure you're honest when you complete the application form.

Keeping the cost down

While it's vital that you're always honest when applying for car insurance, there are a few things you can do to keep the costs down. To find out how to do this, adopt this goal and follow our car insurance action plan, and then take a look at these five tips:

1)  Boost your voluntary excess

As I mentioned above, the higher your voluntary excess, the lower your premiums will be. So if you can afford to pay more for your excess, it's worth increasing it. Just don't increase it so much that you won't be able to pay for it.

2) Mileage calculations

Consider carefully how much mileage you're actually likely to do. The higher the mileage, the higher the premium - so make sure you don't overestimate. That said, don't underestimate either, otherwise you could jeopardise your claim should you need to make one.

3) High security

Increasing the security of your car will help lower the premiums. So if you have a garage, make sure you use it and state this on your application form. You can also bring your premium down by adding an immobiliser, alarm and tracker (which allows the police to locate your car if it's stolen) to your car.

4) Avoid modifications

Try to avoid adding expensive accessories to your car - if you add alloy wheels and spoilers to your car, or boost the engine size, your premium is likely to go up significantly.

5) Pay in one go

When it comes to paying out for your insurance, steer clear of monthly payments if you can, and pay the full amount upfront instead. That's because most insurers will charge you more for paying in monthly instalments - in fact, you could be charged an interest rate as high as 30% APR. 

If you know you won't be able to afford to pay it all in one go, consider paying for it with a 0% new purchases credit card instead. Just make sure you've cleared the balance before the end of the 0% period, otherwise you'll be hit with a hefty rate of interest.

For even more tips, check out 12 tips to drive down your car insurance costs.

Final points

Around one in five motorists never bother to read their insurance policies! Make sure you're not one of them, and instead, sit down to read the terms and conditions carefully.

It's always important to check whether the policy is right for you, and covers you for everything you need cover for - don't simply choose a policy because it's the cheapest. For example, check to see whether legal cover is included. And will you be offered a courtesy car as standard if something happens to yours? If you won't, and you know you will struggle to cope without a car for a few days, it may be worth paying a bit extra for your policy to ensure this cover is included.

That said, don't be tempted by added extras. Some policies will offer breakdown cover, for example, for an extra charge. However, you can probably buy it cheaper elsewhere so don't simply sign up for it without shopping around first. Find out more in Slash your car breakdown cover to £34 a year.

Finally, if you only need car insurance for a limited period, or you won't be driving the car frequently, you could consider short-term car insurance or pay-as-you-go car insurance.

And if you'd like even more help keeping your car insurance costs, register on lovemoney.com and adopt these goals: Slash your insurance costs  and Cut your car costs. Next, watch these video: Beating the renewal quote is nothing to shout about and Cut your car insurance costs. And then, why not drive yourself over to Q&A and ask other lovemoney.com members for advice?

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