How to save money on your car insurance

From when to buy, to why adding Mum to a young driver’s policy helps, we share our top tips to help bring down premiums...

How to save money on your car insurance

After years of continuous increases, car insurance premiums actually decreased in 2020. The average price paid for a policy in the second and third quarters of the year was £460, according to the Association of British Insurers’ (ABI) Motor Insurance Tracker. That’s the lowest level for four years, and is £8 lower than for the same period in 2019. The downward trend is partly explained by coronavirus restrictions slashing the number of journeys made and accident rates dropping significantly as a result. 

Another factor that is likely to push premiums down further in the coming year is the introduction of new legislation – the Civil Liability Bill – aimed at reducing the amount paid out for personal injury claims, such as whiplash sustained in car crashes. This should have come into force in April 2020 but has been delayed for a year due to the pandemic. 

However, drivers can save even more on their motor insurance by buying smarter. There are a number of ways to shave money off your premium, but the best is to plan ahead. If you buy cover at least three weeks before you need the policy to start, you could save more than £700 for a non-black box policy, that is one that doesn’t require a telematics system to be fitted to the car. 

Research by What Car? reveals that the highest cost of annual cover for a 22-year-old driver in our favourite version of the UK’s bestselling car, the Ford Fiesta, is £5913 if the policy is due to start in three weeks’ time, but the same cover rises to £6646 if you want it to start in a week’s time. LV, the insurer quoting these eye-watering prices, wouldn’t even offer cover if we wanted it to start on the same day. 

Prices obtained for the same car and driver via the Compare The Market comparison site shrank by £658, from £2663 to £2005 for a black box policy, when we changed the start date from the same day to three weeks ahead, and the best price on MoneySuperMarket went down by £592 – from £2863 to £2271 – after we made the same adjustment. 

Some insurers, including Aviva, maintain the same price for up to 60 days, but our driver’s quote of £3999 from Aviva was more than double some others. When shopping for insurance for newly qualified young drivers – the hardest hit by insurance premiums – it could be worth buying a cheaper motor insurance policy that doesn’t start for a couple of weeks and taking out some additional short-term cover for the period before that policy begins. 

Best prices from leading insurance providers

Source of quote Start today Start in 1 week Start in 2 weeks Start in 3 weeks
Aviva £3999 £3999 £3999 £3999
Compare the Market* £2663 £2240 £2118 £2005
Confused.com* £2545 £1957 £1881 £1774
Direct Line £1805 £1362 £1609 £1594
Co Compare* £3094 £2575 £2581 £2402
LV na £6646 £6033 £5913
MoneySuperMarket* £2863 £2555 £2467 £2271

*All black box policies

Cover is for a 2020 Ford Fiesta 1.0 Ecoboost 95 ST-Line, for a 22-year-old single male living in Croydon

Looking for insurance online

Other money-saving tips 

1. Shop around 

About £1.9 billion a year is wasted by car owners who let their insurance renew automatically, according to comparison site GoCompare. It revealed that 21% of UK motorists – 6.7 million of them – didn’t check for cheaper cover elsewhere in the first eight months of 2020. 

So, never simply accept a car insurance renewal price. Instead, get similar quotes on comparison websites such as Compare The Market, Confused.com, Go Compare and MoneySuperMarket, because some insurance companies will offer special prices on one site but not others. It’s worth changing the date by a week at a time to see which date comes up with the lowest quote. 

Also check Aviva and Direct Line separately, because you won’t find these insurers on comparison sites. In the case of our 22-year-old driver, Direct Line offered the most competitive quote overall and didn’t require him to have a black box fitted. 

It’s worth looking for deals even if your insurance isn’t up for renewal soon. The amount you save on a new policy could be significantly more than the fee to cancel your existing cover – usually £50 or less. 

Once you do find a cheap quote, you need to snap it up the same day, because some insurers only offer the best prices for a short time – some for less than 24 hours. The cost of the premium can rise significantly if you leave it and then go back later, even though none of your details have changed. 

2. Pay annually 

The cost of an annual policy can seem daunting, but it’s worth paying for it up front because that could save you hundreds. The interest rate for paying in monthly instalments ranges from 25% to 36% and that could be as much as £540 on car insurance costing £1500. 

If you don’t have the spare cash in the bank for annual cover, consider getting a credit card with a zero or low interest rate for purchases, because this could work out cheaper. 

Another reason to pay annually is to avoid having credit checks done. Pay for your insurance up front and the insurer will only do a ‘soft search’ on your credit history to confirm your address and other personal information and this won’t affect your credit score or be visible to other companies. However, by choosing monthly instalments you're, in effect, taking out a loan with the insurance company, so they will run a ‘hard’ credit check that will be visible on your record. 

Government to investigate graduated driving licences for new drivers

3. Lower your mileage limit 

Working from home has decimated the annual mileages of millions of us. Pre-coronavirus figures estimated that the average UK driver would rack up around 8000 miles in 2020, but that has now plummeted to just 3000 miles, potentially equating to savings on cover. It’s important to be accurate about your annual mileage, though, because your cover could be invalid if you exceed the stated figure. Some insurers also levy heavy fees for every mile you do that’s over the limit. 

4. Pick your profession carefully 

Although you can’t lie about what you do for a living, there might be a number of ways to describe your job, so play about with the options on a couple of websites to see how much you could save. Changing our Fiesta driver from a film technician to a video editor cut his premium with General Accident (via MoneySuperMarket) by £324. 

5. Raise or lower the excess 

If you’re the gambling type, you could opt to pay a heftier voluntary excess fee if you have an accident in order to reduce your premium. However, it’s not worth raising the excess too much; if it’s £1000 on an older car, you might not get any payout if the car is written off. 

6. More cover might cost less 

There are three main levels of car insurance: third party, which only pays out to the other person if you’re involved in an accident; third party, fire and theft, which also covers those two causes of accidental damage or loss; and comprehensive, which also covers the cost of repairs to your vehicle. 

It might sound strange, but buying comprehensive cover often works out cheaper. This is because insurers price policies according to how much they’re paying out to those taking out that type of cover. With younger, less experienced drivers being the main purchasers of third party cover, this can make it more expensive than comprehensive. For younger drivers, who have the most crashes, some insurers only offer comprehensive cover. 

Learner driver looking nervous

7. Add a named driver 

It’s worth putting an older, experienced driver with a blemish-free driving history onto a policy for a younger driver. We added a 55-year old female with a long no-claims bonus and no convictions to our Fiesta driver’s policy and it shaved £30 off the premium. 

8. Use a dash cam 

Some insurers will offer a discount to drivers who have a dash cam. Even if you don’t get money off, it’s worth considering getting one, because it could provide useful information about who was at fault in an accident. That said, some insurers will demand you pay back any discount given if you’re involved in an accident and then aren’t able to provide footage. 

dash cam

9. Get some extra training 

Some insurers offer discounts of up to 30% to drivers who’ve taken extra training. To get the biggest discounts, you’ll need to complete a course, such as the advanced driving course run by IAM RoadSmart, and get insurance through its bespoke insurance service. 

10. Multi-car cover 

A growing number of insurers are offering discounts in return for bundling the cover for more than one car, or for your car and your home. Aviva gives a 20% discount on any second or subsequent cars added to an existing policy, and Admiral claims some of its customers have saved as much as £345 this way. Any discount might not negate the additional cost of a policy with a high premium, though.

Alternatively pay by the mile

A new type of car insurance was launched a couple of years ago that could now appeal to a far wider audience. By Miles charges car owners a small, set fee up front and they then pay every month according to the miles that they actually cover. Now that more people are working from home, this could help a lot of drivers to save money.

By Miles doesn’t offer cover for drivers aged under 25, so we can't draw a direct comparison with the quotes above, but we did get a quote for an older driver whose daily commute is just five miles, based on using our favourite 1.0 Ecoboost version of the UK’s best-selling car, the Ford Fiesta. Our older driver would pay £171 up front and then an estimated £8 a month after that, resulting in an overall annual premium of £267 if he made occasional longer journeys that bumped his annual mileage up to 3000. He pays 3.2 pence per mile, with the daily maximum mileage he can be charged for capped at 150 miles. 

Cover is only available for models that can have the By Miles Tracker plugged into their onboard diagnostics port, but, unlike black box policies, By Miles only takes into account the distance you drive, not how you drive or your speed. That means you won’t be penalised for less than angelic driving. 

Next: What type of car insurance should you buy? >

Page 1 of 5

Spinner