Top Car Insurance Quirks You Need to Know About

Top Car Insurance Quirks You Need to Know About

How much do you know about car insurance? If you've been driving for any length of time, you might consider yourself an expert in this area. However, we're willing to bet there are many things about insurance you don't know. The industry, especially when it comes to car insurance, is rife with quirks that only those in the know are aware of.

In the following paragraphs, we'll discuss some of those quirks and how they can be used to your advantage. If your goal is to find the best policy for the least amount of money, you should find this information quite helpful. At the end of the day though, getting a great deal on insurance requires some investigation and quote comparison.

Quirk #1 - Writing off Your Car

When people purchase a brand-new car from a dealer they sometimes assume the vehicle is worth the same amount of money months down the road. However, that's not the case. New cars lose value as soon as you drive them away because the profit and expenses of the dealer were built into the retail price. Nevertheless, truth be known, you could not take your brand-new car down the street and sell it to a different dealer for the same amount of money you paid for it.

According to Which?, the average brand-new car in the UK loses between 40% and 60% of its value within the first three years of ownership. Experts say as much as 20% of that value could be lost within the first month or two. Here's the quirk: if your insurance company should write off your vehicle, they will only pay you its current value. That won't necessarily be enough for you to pay off what you owe on your loan.

For example, if you paid £15,000 for a new car that was written off after an accident just two years later, you may only get £7000 from your insurance company because that's the street value of your car. You would be responsible to pay the remaining £7000 pocket to satisfy your loan.

This is the reason experts recommend you purchase guaranteed asset protection (GAP) insurance if you are taking a loan on a brand-new car. GAP insurance pays the difference between what you owe and what your car is worth. Moreover, since it is fairly inexpensive GAP insurance is a great investment if you're taking a loan.

Some things to know about GAP insurance before we move on:

  • it's not a legal requirement
  • you don't have to purchase it through your lending institution
  • you can bundle it with the rest of your car insurance
  • there's no need to carry it after your loan is paid off

Quirk #2 - Insurance Groupings Affect Premiums

For decades, the insurance industry placed different models of cars into the various groupings for valuation purposes. These groupings were taken into consideration when determining how much a customer would pay for car insurance. In 2010 the groupings were expanded from 1-20 to 1-50.

The expansion of the groupings meant drastic changes for some people in terms of the cost of their car insurance. Parkers explains the phenomenon on their website. In a nutshell, if the new groupings caused your car's group to increase your insurance premiums likely went up as well. Those whose groupings decreased would see lower premiums.

Three years later insurance groupings are still important in determining car insurance prices. Therefore, when you're shopping for a new or used vehicle, it's wise to do a little investigation regarding groupings. It is helpful to know up front so that you can get a good idea of how much insurance will cost before you make a purchase decision.

Remember that the month-to-month cost of owning a car entails more than just what you pay the bank. Total cost of ownership includes your loan payment, the cost of petrol, routine maintenance, breakdown repairs, and insurance. Moreover, since your loan payment and insurance are your two biggest expenditures you want to make sure both fit into your budget.

Quirk 3 - Parking on the Street Might Be Cheaper

Normally we assume parking the car in the garage at night results in lower insurance prices. Sometimes that's true, but not always. There are times when you could actually save money on your car insurance by parking in the road. Here's why:

Insurance prices relating to where you park are directly tied to vandalism and theft. There are some communities in which statistics suggest your car is more likely to be vandalized or stolen when parked in your driveway or in a garage. This may sound strange, but some car thieves are more comfortable knowing which car belongs to which home before stealing or vandalizing one. In communities where garaged cars are more susceptible, it's cheaper to park in the street.

A good way to determine the circumstances where you live is to give two different answers when you are comparing quotes. Tell one company you are parking your car in your garage or driveway and another that you're parking on the street. Then compare the results in the quotes provided. Just beware that when you finally decide what policy you purchase you must be honest with the insurance company about where you intend to park.

Quirk #4 - Your Employment Matters

Car insurance is all about risk. When you purchase a policy, your provider is putting their money at risk and hoping you do not make a claim that exceeds how much you've paid into the system. You are taking a risk that you'll pay a lifetime of car insurance premiums without ever receiving any benefit.

As it turns out, what you do for a living greatly affects the risk factor for both you and your insurance company. Statistics show that people in certain occupations are more likely to file claims than those in others. That's why car insurance companies ask you about what you do for a living when determining your price. Among the most expensive professions are:

  • doctors and nurses
  • government workers
  • self-employed contractors
  • restaurant owners

For this reason, experts suggest you be very specific about your employment when searching for car insurance quotes. In other words, do not generalise. Using the restaurant owner as an example, his or her occupation is considered a greater risk than someone who owns a small café. Therefore, the café owner needs to be specific about his or her business rather than simply saying he or she owns a restaurant.

Quirk #5 - Adding Drivers May Reduce Your Premiums

Believe it or not, adding a second driver to your policy may actually reduce what you pay. According to a car insurance guide published by Moneywise, it may not even matter who that second driver is. They cite an example of a 29-year-old male journalist who saved £200 simply by adding his 26-year-old girlfriend to his policy.

None of this makes sense given the fact that extra drivers increases insurance company risk. The only explanation we can think of is that insurance company believes the girlfriend, who represents a lower risk, will be driving the car just as often as the male. This would reduce their overall risk by splitting up the driving between the more risky driver and the less risky one.

In either case, adding a second driver to your policy might provide a financial benefit. You will have to contact your insurance company and ask to be sure.

Quirk #6 - Classic Cars Cheaper to Insure

Moneywise also claims classic cars are cheaper to insure because they are usually driven more carefully and taken better care of by their owners. That makes good sense. If you are willing to purchase and drive a classic car, you could reap significant financial savings. You might not even have to settle for a car that's more than 20 years old. It just depends on your insurance company's definition of a classic car.

For example, some insurance companies regard any Jaguar older than five years to be a classic. You can use that to your advantage if you are willing to purchase a pre-owned Jaguar at a retail auction. For some reason, Jaguars do not retain their value as well as some other luxury vehicles. You can find them at pretty reasonable prices on the auction block.

If you could find a Jaguar at a good price, not only would you be tooling around town in style, but you would be saving on your insurance as well. A little research into insurance groupings and car resale values should help you figure out if the classic car approach is right for you.

Conclusion

Since car insurance is something all of us have to have, drivers are at a disadvantage when it comes to determining market prices. However, no one has to simply settle for what their car insurance company charges them. All of us have the opportunity to compare prices and policies.

When you are shopping for your next car insurance policy, remember these quirks and use them to your advantage. Anything you can do to reduce your price while still getting suitable coverage is definitely worth your time and effort. Insurance rates will not be going down drastically any time soon, so you might as well pay as little as necessary.

When you buy insurance directly from the provider, you may be able to get a better deal or a more suitable policy. The following are links to some of the more reputable car insurance providers in the UK:

Aviva - Aviva are one the biggest and most reputable car insurers in the UK. You won't find their car insurance deals on comparison sites so you will have to go direct to get a quote.

RAC - The RAC offers a long list of benefits to members, including great rates on car insurance. Get quotes here for cars, classics, motorbikes, and more.

Comparison websites offer great way to get multiple quotes quickly. Here are some links to the UK's most well known and oft-used comparison sites where you will find car insurance quotes:

Compare the Market - Filling out one simple form on this site results in multiple quotes from the UK's best providers. When you quote and buy online, you can get free plush meerkat toys as a gift.

Go Compare - You have the chance to win free car insurance when you quote and buy here. This site offers quotes from more than 120 providers.

Money Supermarket - Save as much as  £300 when getting quotes from this site. They compare prices from 134 different providers around the UK.

Confused.com - If you're part of the Nectar program this comparison site is for you. Earn 2,000 nectar points when you by online from one of more than 130 quoted providers.

Tesco Compare - Offers quotes from seven different car insurance carriers. When you buy online, you might be eligible for free key recovery service for up to 12 months.

uSwitch.com - A site where you can get quotes from 90 different car insurance companies. Your savings could be as high as £400 when you take advantage of their quotes.

Money.co.uk - This site offers cost comparisons of more than 380 car insurance products. Some providers you may recognize include Aviva, Direct Line, and Admiral.

Totally Money - Provides quotes for 80 leading providers across the UK. Your savings could be as much as £540 when you use one of their telematics providers.

Money Saving Expert - This is one of the Internet's leading informational websites for insurance information. Their extensive library of helpful advice regarding car insurance is second-to-none.