Home Finance Budget motor insurance danger as 3 key policy claims are excluded and...

Budget motor insurance danger as 3 key policy claims are excluded and many don't know


Motor insurance premiums increased by another 18 percent last year to an average of £850, according to new research from Compare the Market.

Prices are rising even faster for drivers aged 80 and over, up a staggering 27 percent in the year to May.

They still pay less than other drivers, with premiums costing £656 each on average. However, that is a big jump on £517 in May last year.

Motorists in the 65-79 age group are considered safest of all, paying £412 on average, closely followed by 55-to-64 year olds at £431.

Inevitably, younger motorists pay the most, with 16-to-24 year olds paying a staggering £1,901 on average.

Typically, drivers who fail to shop around at renewal but simply stick with the same insurer for years pay most.

Compare the Market claims that it could save motorists up to £549 a year, but that depends on factors such as how old you are and how much you pay today.

The comparison site puts the increase down to a sharp rise in the cost of insurance claims, as the recent inflation surge drove up the cost of spare parts, energy and hiring mechanics.

There are now signs of a slowdown as inflation eases off, with the average premium declining from a peak of £951 in November.

Compare the Market director Anna McEntee said premiums are still far higher than a year ago and loyalty to one insurer does not pay. “We want to encourage older motorists who may be more inclined to stick with their existing insurer each year to compare prices ahead of renewal to see what deals are available.”

Some drivers have been tempted to switch to a new type of stripped-back, low-cost “essentials” cover, but campaign group Fairer Finance is warning consumers to work out exactly what is covered with these policies, and what isn’t.

Admiral, Ageas and Hastings have offered these policies for some time, and were joined last year by Churchill and Sainsbury’s, with Geoffrey Insurance and newcomers Boom and Moja going down the same route.

They provide more cover than basic third-party, fire, and theft policies, but omit many features found in standard car insurance policies.

Windscreen cover is a typical exclusion.

This covers the cost of repairs or replacement for chipped, cracked, or smashed windscreens, and possibly back windows and sunroofs.

With a budget policy, you may have to pay for any damage yourself.

Claims for lost or stolen keys are another common exclusion. Again, you would have to cover the cost from your own pocket.

The third common exclusion is a courtesy car. If you don’t need this cover – for example if you have a second car – this may be a saving worth making.

Many budget policies exclude a fourth policy benefit: a guarantee to reinstate your no-claims discounts and reimburse excesses if involved in an accident with an uninsured driver.

So you have to decide whether the savings are worth the extra risk. For many, they are. Just read the policy small print carefully so you know what you are buying.

Fairer Finance managing director James Daley warned that there is no standard definition of an essentials policy. “Insurers and comparison sites must be clear about the exclusions and limitations on these policies.”

He said motorists need to understand these restrictions when buying insurance rather than at the time of making a claim.

Daley suggested there should be a minimum standard for comprehensive policies to prevent insurers from continually stripping back features to bring down the price. “By offering low coverage limits, insurers can reduce payouts per claim while maintaining the ‘comprehensive’ label on their policies.”

He added: “Swinton’s Essentials policy imposes a £150 limit on windscreen repair and replacement. Given the rising cost of glass, this makes it likely that customers will have to cover the excess and any additional costs.”

Buying a smaller, cheaper car could be a better way of cutting motor insurance costs, according to research from comparison site GoCompare.com.

It said the Citroen C1, Ford KA, Kia Picante, Hyundai i20, Fiat 500 and Peugeot 107 and Mini Cooper cost least to cover.

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