Is Your Car Insurance As Cheap As It Looks

Nobody looks forward to choosing their car insurance. Many people stay with the same company year on year to avoid endless phone calls or trawling quote comparison sites at renewal. Nowadays, however, many companies offer significant introductory and online discounts which only apply for the first year. What this means for the consumer is that shopping around makes good financial sense. But while it can be extremely tempting to go for a cheap policy, it's wise to know exactly what you're buying into.

What's Missing?

Sometimes one company will offer Fully Comprehensive coverage for the same rates as another's Third Party insurance. This should ring alarm bells, it's possible it's cheaper for a reason.

A car insurance policy booklet is divided into sections. The level of cover you have purchased will include some or all of these. Third Party Only is the legal minimum and included in all policies. Mandatory since 1930, it covers you for damage to another's person or property. Then Fire and Theft is added to that, followed by damage to your own car - Fully Comprehensive includes all three.

There are things we automatically assume to be part of a Comprehensive policy - European coverage, windscreen coverage, a courtesy car, coverage for driving other cars - but not necessarily so. Policies may have been stripped to the bare bones in order to appear cheap. The missing features may then be offered as chargeable extras, so take care.

If you are considering driving abroad, check what level of coverage you will actually have while out of the country. It might be lower than your normal level of coverage and you may only be allowed a limited time abroad. To increase the time or level of coverage would then be chargeable.

Auto Insurance Excesses

So you have a cheap policy that seems to give all the coveage you need. The next thing to check are the excesses. These are what you pay in the event of a claim, such as deductibles. Sometimes they can be high in order to keep the premiums down and there are compulsory excesses on top for categories of driver who the insurer perceives to be a higher risk. This may include young drivers, foreign drivers or those with points on their license - check which apply to you.

Extra Charges

Whether we want to believe it or not, it does cost an insurer to set up or cancel a policy, and to process your claims. As businesses, they will attempt to recoup the costs from the customer, probably in the form of cancellation fees or charges for amending your policy. If the premium is very low these charges may be higher to compensate. Some cancellation fees are even levied within the mandatory 14 day cooling off period, so be aware of what you're letting yourself in for.

Sadly the process of renewing your insurance remains a long, drawn out process and even higher premiums may not include everything so it's worth devising a checklist to use when you shop. Go in armed with your own questions and reduce your chances of unpleasant surprises later in the year.


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Claudia Buck: Shop, but don't drop, car insurance policies

The recession has run a few drivers off the road, at least when it comes to keeping their auto insurance coverage.

Pinched by pay cuts, job losses and other financial hardships, consumers are downshifting: cutting back on coverage, shopping for more competitive rates or, in some cases, letting their insurance lapse to save money.

Nationally, the number of motorists without auto insurance is expected to increase from 13.8 percent in 2007 to 16.1 percent in 2010, largely due to the sputtering economy, according to a study earlier this year by the Pennsylvania-based Insurance Research Council.

California and Arizona – each with an estimated 18 percent of uninsured motorists – tied for seventh place among all states, according to the IRC's January study. And that was as of 2007, before the recession caused widespread unemployment and upheaval.

The trend has naturally troubled the insurance industry. Earlier this year, state Insurance Commissioner Steve Poizner traveled the state, urging Californians to stay insured and seek out low-cost insurance.

"In today's tough economy, many drivers are looking for ways to cut their expenses and some are undoubtedly considering eliminating auto insurance," Poizner said this week in an e-mail, "but driving without insurance is illegal and puts all travelers at risk."

There are money-saving routes on car insurance that stop far short of dropping coverage altogether. Here's a look at where you can start.



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