Running A Car - Car insurance frequently asked questions

Why are car insurance premiums rising?
Rising costs from personal injury claims, steep legal fees, insurance fraud and uninsured driving have led to rising motor insurance bills for many people.

According to the Association of British Insurers, the motor insurance sector has not been profitable for the past 16 years because the amount paid out in claims and expenses has been greater than that received in premiums, which is why it can seem as though costs are always going up.

Why is insurance so expensive for young drivers?
Motor insurance costs are usually highest for young drivers, as they are considered a greater risk by insurers. For example, male drivers aged under 21 are 10 times more likely to have a car accident than male drivers aged 35 or over.

Taking additional motoring qualifications, such as Pass Plus, is one way in which young drivers can keep down the cost of cover. Pass Plus fees vary, but the cost is usually around £150.

If you passed your test more than a year ago, check that you'll be eligible for the discounts on offer from your insurance company before you take the course. Adding a more experienced named driver to your policy may also lower the cost of premiums.

Should I protect my no-claims discount?
Protecting your no-claims discount may mean higher premiums, but the risk of not protecting it is that if you have to make a claim you will lose some of the discount.

The more claim-free years you build up, the more attractive the option of protecting the discount you've accrued becomes. It's worth bearing in mind, however, that if you do protect your policy but don't make a claim for a number of years, you could find that you are eroding any potential savings.

Also consider that the costs involved with premiums and additional fees for protecting a no-claims discount depend entirely on your personal circumstances and motoring history, and on the insurance provider.

Why does it cost more to pay monthly than annually?
While most people can only afford to pay for their car insurance by making monthly payments, if you do have a lump sum available to pay off the full year's cost up front, you should do so.

Insurers usually charge extra if you make monthly payments, effectively loaning you money that you would have spent on an annual policy and charging you interest on top.

What is the 'total excess'?
The total excess is the amount you pay up front in the event that you need to make a claim. It is usually made up of two parts; the compulsory excess, which is an amount that's specified by your insurance company; and the voluntary excess, which is an amount you choose to pay towards any claim.

The higher the voluntary excess you choose, the lower your premiums will be, but you must ensure that the total excess remains affordable, otherwise you might not be able to make a claim at all.

What is a 'multi-car policy'?
Multi-car policies enable motorists with two or more cars in their household to cover them on the same policy and as a result get a discount on their premium for all their vehicles.

The premium on a multi-car policy is calculated according to each individual motorist on the policy, and each person keeps his or her own no-claims bonus. If a motorist on the policy has to make a claim then only that person's no-claims bonus will be affected.

This type of policy isn't necessarily always the cheapest however, and some people may find that they are able to save money by insuring vehicles on separate policies.

Is fully comprehensive cover better than third party, fire and theft?
Yes. The downside of a third-party policy is that it does not insure your own car. If it is stolen, for example, you would have to pay for a new vehicle out of your own pocket.

Third-party cover is the minimum legal level of insurance you can have, while third party, fire and theft provides a slightly higher level of cover as it also includes theft, and damage to your vehicle caused by attempted theft or fire.

Comprehensive insurance, however, gives you much greater protection as it covers your liability for injuries to other people, including passengers, as well as damage to other people's property. Your own car is also insured against fire, theft and accidental damage. In addition, a comprehensive policy will usually cover personal effects, up to a certain limit, such as a sat-nav system.

However, bear in mind that the cost and policy details can vary significantly depending on which insurer you go to, so always look in detail at what is offered.

This article has been researched and written by whatcar.com's car insurance partner, MoneySupermarket