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When Fully Comp Is Cheaper Than Third Party

Neil Faulkner
by Lovemoney Staff Neil Faulkner on 19 February 2008  |  Comments 0 comments

Sometimes an insurer offers you a cheaper price for fully comprehensive car insurance than it does with basic third party, fire and theft cover!

Insurers love statistics. If car insurance firms could get statistics on drivers who own chickens, they'd be delighted. I wonder if such drivers would be safer on the roads?

More commonly, though, insurers collect statistics on such things as your age, occupation and type of car. As you well know. The price of the insurance depends on how high a risk statistics show you to be.

Usually, this works remarkably well for insurers. However, sometimes basing premiums purely on statistics can throw up little anomalies. One of those anomalies can lead to insurers making fully comprehensive insurance policies cheaper than third party, fire and theft!

Here' s a typical example of when that happens. You're a young, cocky driver with an old banger, and you like driving fast. It's just a cheap old car, so you insure it third party, fire and theft. Your insurer insures 10,000 others just like you.

Unsurprisingly, you have, between you, more crashes than the average driver. What's more, because of your speed and recklessness, you cause a great deal of damage to other people's vehicles, and cause many an injury. These claims typically cost thousands, with the odd million-pound claim thrown in for good measure.

Now, let's look at an alternative scenario. You're a young driver who takes out a loan to get a newer car, and this is a lot of money to you. The car is your baby, so you insure it fully comprehensive. Only the best cover for your boy/girl! Now, the last thing you want to do is damage it, especially after spending so much money on the insurance.

As a result, you drive more carefully. You have fewer accidents and the crashes aren't at such high speed. Unlike third party, fire and theft, your insurer has to pay for damage to your own vehicle, in addition to the other vehicle and for injuries to other people. However, because you've been driving more carefully and slowly, your crashes aren't so severe. You've barely dented the other person's car and you've caused no injuries, so your claim is relatively cheap.

These are both quite typical scenarios, so insurers look at these statistics and say: ‘Hmm, young drivers with third party, fire and theft policies cost us a bit more money than young drivers with comprehensive policies. Therefore, we'll charge an extra 10% to the first group.'

And this actually happens. The third party policy ends up being more expensive.

This tends to go in annual cycles because, the next year, the smarter brokers advise many young drivers to get a comprehensive policy rather than third party, fire and theft. For that whole year, young'uns with fully insured, ten-year old cars race around the streets.

At the end of the year, insurers look again at how their beloved statistics are doing and say, 'Hang on. Now it's kids with comprehensive policies who are costing us the most money. Let's charge them more instead.'

Not all insurers have this cycle (although big ones are just as susceptible as small ones). Whether you can find a cheaper comprehensive policy depends on your entire profile, not just your age and the age of your vehicle. Sometimes more mature drivers can benefit from such statistical anomalies.

So all drivers who require third party, fire and theft should look at comprehensive prices as well. And insurers might have to start counting chickens; it's no stranger than their obsession with statistics, and it might re-coup some of the losses this anomaly causes them!

Don't just look at the price, because small print varies a lot. We give you some tips in our car insurance guide. | Compare car insurance quotes through The Fool.

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