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Young Driver Car Insurance, from Moneysavingexpert.com

[From an original article published on www.moneysavingexpert.com]

The cost of car insurance for under-25s is eye-watering. The average price for a 17-20 year-old male is £2,960. Yet there are many ways to help cut this cost.

This is a step-by-step guide to young drivers’ car insurance, helping you compare over 100 providers in minutes, with specialised tricks, and dos and don’ts to save every spare penny.

DO ENSURE YOU ALWAYS MINIMISE YOUR RISK

Whether or not you’re a young driver, insurance premiums (the payments made to insurance companies) depend on three things:

By reducing an insurer’s perception of your risk, you can reduce the price you’ll pay.

Car insurance rates are set by actuaries, whose job is to calculate risk. Make sure you’re as little of a risk as possible, and you can make big savings by showing an insurer you’re not the typical high-risk young driver. Each insurer’s price depends on two things. First, the underwriters’ assessment of your particular situation; and then the pricing model that dictates the type of customers the insurer wants to attract.

Do fit a security device

Any extra security will help. Fitting an alarm or immobiliser (especially one approved by Thatcham) can reduce the bill substantially.

Do park and drive carefully

Theft and accidental damage add a wedge to insurance costs. If you leave your car in a garage or driveway, it’s a big deterrent to theft and means accidental damage is less likely, resulting in a 3-7% drop in insurance costs.

If you have points on your licence, the cost will be higher. While speeding points remain on your licence for four years, insurers usually check for convictions during the last five before they are removed from your record.

One speeding conviction may only affect the price of cover by around 5%, but any more’ll bump up the price, with two offences costing around 20% more.

Being caught with a mobile phone is more serious and can double your quote. It can also give you three instant points on your licence, which stay on for four years. Approved hands-free kits are fine if used properly.

Do reduce your mileage

The less you drive, the cheaper your insurance will be. Where possible, try to reduce your mileage. This may sound trite, but actually the real key is incorporating the extra insurance cost when you make long journeys, not just the cost of petrol compared to taking the bus or train (also read the Cheap Trains guide).

Anecdotally, though many simply get a quote for 10,000 miles per year, MoneySavers have reported that 5,000 is the best figure to use – though we haven’t tested this. If you drive your vehicle on business, always declare this rather than just include the business miles as personal, or the policy may be void.

Do look at additional driving courses

PassPlus: This Driving Standards Agency course is aimed at helping new drivers (within 12 months of passing their test) become more confident on the road. There are six modules: town driving, all-weather driving, driving out of town, night driving, driving on dual carriageways and driving on motorways.

The cost of the course is about £140 but does vary depending on where you live and the instructor or driving school you choose. Yet some local councils offer discounts of up to 40%, usually for those under 25, and in Wales it only costs £20 (check if your council is taking part).

Once you have the certificate some, although not many, insurers discount the price of your insurance. Sadly it’s become less and less recognised in the last few years, so the discounts aren’t generally that high, and there’s a high chance you could get cheaper cover elsewhere.

Drive iQ: This course is provided by the AA and selected independent driving schools – and included within the cost of your lessons – which combines online learning with practical lessons for learner drivers.

It covers attitudes and behaviour to driving, rather than just car control skills, and is based around five units which also include motorway and night driving. It says once you’ve passed, you’re eligible for exclusive insurance deals. But check quotes with Drive iQ before you sign up, to see how it compares.

For an optional £50 fee, you will receive a BTEC qualification (equivalent to a GCSE) in Driving Science as well as your licence if you pass.

DON’T ASSUME THIRD PARTY’S CHEAPER THAN COMPREHENSIVE

Before we begin, it’s important to understand that there are three different types of car insurance: third party, third party fire and theft, and fully comprehensive (full definitions below).

Logically, third party insurance should be cheapest for young drivers as it offers a lesser level of cover than fully comp, yet this isn’t always the case. So get quotes for third party and fully comp, just in case it’s cheaper. Plus always make sure you check your policy so you know exactly what you are and aren’t covered for in the event of a claim.

The rationale might be that insurers see third-party buyers as higher-risk group, as because their car is uninsured (except for damage caused to other cars), they may be more careless with it, so prices are pushed up. To illustrate this, in one low-risk young driver quote we found a £1,500 saving for having comprehensive cover over a third-party only policy. Always check for both.

THIRD PARTY

The minimum level of cover you need to legally be able to drive on the road is called ‘third party’. It used to be the cheapest type of insurance, but fully comprehensive policies can now sometimes be cheaper.

Third party covers you for any damage you cause to another person’s vehicle, and gives protection for any passengers in your car.

Therefore, if you’re in an accident and it’s your fault, you’ll have to pay for any repairs to your own car yourself, as your insurance won’t cover it. It may be more expensive because it’s assumed you care less about your car and are therefore more likely to have an accident.

It’s generally the most suitable for those:
With cars worth less than £1,000
Aged under 25
Without a no-claims bonus
Living in a high risk area

THIRD PARTY FIRE AND THEFT

Third party fire and theft has the same level of cover as third party insurance. However, self-evidently, it also offers assistance if your car is stolen or set on fire.

FULLY COMPREHENSIVE

This is the widest level of cover, but can sometimes be the cheapest. The big advantage is that if you have an accident and it was your fault…

You’ll be able to claim the cost of repairing your car, and cover personal injury costs, as well as those of other drivers.

The cover also includes accidental damage, windscreen and vandalism, for example if somebody causes damage to your car when it is parked in the street and drives off.

Plus you’ll usually (though not always, so do check your policy details carefully) be able to drive other people’s cars if you have their permission, although this is likely to only be the minimum level of cover. Sometimes you’ll be covered for driving hire cars too.

Fully comp is a good idea if your car is worth more than £1,500, and gets more important the more valuable your car is. Many insurers will only offer fully-comprehensive cover for higher value cars anyway.

There are a few ways of cutting the cost of fully-comprehensive cover. For example, Tesco Value insurance offers a comprehensive policy but has a higher compulsory excess, which lowers the cost. However, this doesn’t automatically make it cheapest – make sure you use the comparison sites below to check first.

DO TRY ADDING A SECOND RESPONSIBLE DRIVER TO YOUR POLICY

If you’re under 25, insurance can cost a fortune. Yet by adding a second driver to the insurance, even if they won’t use the car often, it can smooth out the average risk and sometimes reduce the premium. Those with an additional record for driving well are likely to help make bigger savings, but anyone that’s in a lower risk category than you can help.

We noticed by adding a 40-year-old family member as an ‘occasional’ user (not a main driver) to an 18-year-old’s policy reduced the premium by approximately £1,000. It won’t always work, but it’s worth playing with quotes to check.

Don’t confuse this with ‘fronting’, which is illegal – more below.

DON’T PUT SOMEONE ELSE AS FIRST DRIVER IF IT’S YOUR CAR

If it’s your car and you’ll be the main driver, don’t be tempted to put someone else down as the first named driver. Young car owners who list parents as the main driver to cut insurance costs are doing what’s called ‘fronting’ – and IT’S ILLEGAL.

This route may be suggested by well-meaning parents who aren’t aware that they’re doing anything wrong, and are keen to get a cheaper quote. Yet the consequences can be very serious; it invalidates insurance and can lead to prosecution, so don’t do it.

DO TELL YOUR INSURER ABOUT CHANGES AND SPECIAL CIRCUMSTANCES

If you haven’t got ‘normal’ circumstances, eg, you’ve made a claim in the past few years, have a modified car or expect to drive 100,000s of miles a year, tell the insurer. If you don’t and then try to claim, even for an unrelated issue, your whole policy may be invalid.

Plus you should also tell your insurer about any changes. This is crucial as it reduces potential problems in the event of a claim, even if it’s just your address. Trying to get insurance after you’ve had a policy cancelled due to a fraudulent claim is very difficult, very expensive and will follow you for the rest of your life.

A change in circumstances includes moving jobs, as insurers believe this can affect your risk. Scandalously, the unemployed often (though not always) pay higher rates for their car insurance, so do inform your provider if you’re out of work but also do the full combine comparison site checks below to see where you can get the cheapest cover.

DON’T PIMP YOUR CAR

Sexy it might be, MoneySaving it ain’t. The more changes you make to your car, barring security ones, the more you’ll be charged.

Always make sure you inform your insurer of any modifications to your car, whether you made them or not, or it may invalidate your policy. A modification is anything that isn’t part of the standard vehicle specification, including factory-fitted optional extras such as alloy wheels.

DO WORK OUT HOW MUCH YOU’D REALLY CLAIM FOR

It’s worth considering going for a policy with a higher excess (the amount of any claim you need to pay yourself). Many people will find claiming for less than £500 of damage both increases the future cost of insurance and can invalidate no-claims bonuses, meaning it’s not always worth making a claim.

So why pay extra for a lower excess? A few policies will substantially reduce premiums for a £1,000 excess, so try this when getting quotes. The downside of this is if you have a bigger claim you’ll have to shell out more, so do take this into account.

DON’T BE TEMPTED TO LIE

With insurance, remember – the golden rule is:

If you’ve read these tips and thought, “it’s easy to lie about this”, then of course, you’re right.

Yet lying on your insurance form is fraud. It can lead to your insurance being invalidated and, in the worst case, a criminal prosecution for driving without insurance. Don’t do it.

DO TRY MULTI-CAR POLICIES IF YOU LIVE WITH PARENTS

If you’ve two or more vehicles between friends or family members in your household (vans can be included in this but bikes usually aren’t), some providers offer discounts if you insure them all together. Comparison sites don’t have the technology to do these searches, so you need to compare manually.

First, use comparisons for each car separately. The discounts are usually around 10%, so often it’s likely just finding the cheapest standalone insurer will win anyway. So always do a comparison first (see combine comparison sites below), then try the deals below to compare.

Get all cars on one policy. Cover two or three cars and Admiral* will give up to 14% discount, cover four or five and you could get up to 23% discount. All cars will then be covered on one policy so the renewal date will be aligned to end at the same time.

Separate policies but still get the discount. Other insurers allow cars to have separate policies but give a discount as long as the vehicles are in the same household.

Privilege* gives up to 10% off, Direct Line* 15% off, Churchill* (which also covers named drivers on another Churchill policy) up to 15% off. Aviva* isn’t included within comparison sites but will give up to a 33% discount if you cover more than one vehicle.

DON’T FORGET THAT CAR TYPE IMPACTS ON INSURANCE COST

The combination of popularity, engine size and value all have an impact on car insurance cost. It’s worth considering this when you buy; insuring a super-powerful beast of an SUV for a 17-year-old would cost enough to make Bill Gates weep.

DO GET A QUOTE NOW – MEN TO BE CHARGED THE SAME AS WOMEN

An EU court ruling now means men and women must pay the SAME for car insurance. As men, especially younger men, have paid more before, it could mean huge savings from now on.

Previously, men typically paid £315/yr more than women, with under-20s stumping up a large £2,000 more. Even if the prices don’t meet in the middle, savings for men could still be huge.

Get a quote now, and compare it against the cost of your current policy. If it’s much cheaper, consider cancelling and starting a new policy.

As long as you’ve not claimed, you’ll get a pro-rata refund. But check and factor in any exit fees (approx £25-£50) and remember you won’t earn any no-claims during that insurance year.

Use the system in this guide to hopefully beat your current price, or at least find the cheapest possible.

These techniques should slash your costs. Yet even so, for some young drivers, car insurance will remain unaffordable. You need to decide – is it really worth it?

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