Ten Ways To Cut Your Car Insurance Costs

If you're looking to reduce your car insurance costs this year, Serena Cowdy knows ten ways to help you!

This article was first sent to Fools as part of our Afternoon email series.

When it comes to your motor, it seems that `make do and mend' has become the order of the day.

In a recent study by Credit Expert, 50% of those questioned said they were putting off buying a new car in 2009 because of worries about money and the recession.

If you've been forced to stick with an old banger, you'll be looking to cut costs wherever possible. Here are ten ways you can cut the cost of your car insurance.

1. Up your excess

When you make a claim, the excess is the amount you have to shell out before your insurer chips in. If you agree to pay a higher (voluntary) excess, you could cut your premium by 10% or more.

This could be a false saving if you need to claim. Then again, if you have an accident that's not your fault, you can claim your excess back.

2. Vehicle security

Keeping your car as safe as possible will also lower your premium. So - park it in a garage/driveway rather than on the street if at all possible. Fitting an approved alarm, immobiliser or tracking device could also knock around 5% off your bill.

3. Avoid monthly payments

When it comes to coughing up for your car insurance, steer clear of monthly payments if you possibly can. If you choose to spread your costs in this way, your insurer is likely to charge you 10% to 20% more.

Try your best to pay the full amount upfront. If you can't manage this, pay with a 0% on new purchases credit card instead.

Just make sure you clear the balance before the 0% period comes to an end, or your interest-free loan will turn nasty!

4. Third party, fire and theft

If you really can't afford comprehensive cover, consider shifting down to the third party, fire and theft option. This may be a sensible swap if your car isn't worth much.

Just make sure you understand exactly what this level of cover offers. Essentially, if your car is damaged by anything other than fire or theft, it won't be covered; you're not protecting your car - or yourself - against accidents that are your fault.

5. Build and protect your no-claims bonus

You're likely to get a discount on your car insurance if you haven't claimed on your policy for a year. This is your no-claims bonus - a sort of reward for driving carefully.

If you haven't claimed for five years (four in the case of some policies) you can protect your no-claims bonus. Your premium will rise slightly if you do this.

However, you're likely to save money overall - because this protection allows you some (typically two) `free' claims before you lose any of your bonus.

A substantial no-claims bonus could halve your yearly car insurance costs - so protection is definitely worth thinking about!

6. Pay as you drive

If you're an infrequent driver, pay-as-you-drive car insurance could be the right choice for you. With this sort of package, your premiums are based on how often and at what time of day you drive. The less you drive, the less you pay.

Read How To Save Money On Your Car Insurance, by my Foolish colleague Rachel Robson, to find out whether this sort of car cover could cut your costs.

7. Pass Plus

Another way to reduce your premiums is to get the Pass Plus training course under your belt. The government-backed course - made up of six practical modules - is designed to help new drivers become safer, more aware and more confident.

On the downside, completing the course usually costs £150-£200 (this will vary depending on where you live and the instructor or driving school you choose).

However, as a Pass Plus success story you could receive a huge discount (30% or even more) on your car insurance if your insurer supports the scheme.

8. Don't pimp your ride!

Resist the urge to `pimp your ride' with funky add-ons like a flash exhaust or an enormous spoiler. Modified cars usually cost more to insure - so keep it simple!

9. Shop around

The single most important thing you can do to reduce your car insurance premiums is shop around. Recent research from the AA shows that comparing premiums can knock (on average) £225 off the price of comprehensive cover, and £300 off third party, fire and theft.

Never automatically renew with your current provider - many of the best deals on the market are only available to new customers. Compare car insurance premiums online and you'll also get special discounts and deals that aren't available over the phone.

10. Haggle!

It might seem terribly un-British, but haggling could save you hundreds. You could even get your existing insurer to beat rival quotes in its efforts to retain your business.

Read this excellent article, by my Foolish colleague Neil Faulkner, to find out how to beat insurers at their own game.

Good luck!

More: Make A Successful Car Insurance Claim | Don't Fall For These Car Insurance Tricks! | Drive Down Your Car Costs!

> Use The Fool's Car Insurance Comparison Service to help find the right deal for you.