Cheap car insurance: how to keep costs down as bill rise

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The average cost of car insurance rose by £5 in the second quarter of the year, according to insurers.

The Association of British Insurers (ABI) said the price paid for the average policy is now £419 – up 1.3% compared to the first three months of the year. However, the average price is still £11 lower than the same period in 2021.

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The data also shows that the cost of new policies has risen more than the cost of renewals after the Financial Conduct Authority introduced new rules to prevent customers from being overcharged.

The costs for spare parts and repair work are increasing

Average premiums for new policies were estimated at £500 and average premiums for renewed policies were estimated at £371.

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Unlike other supply-based estimates, the ABI numbers track the price of policies actually purchased by motorists to provide an accurate picture of costs across the country.

Callum Tanner, General Insurance Manager at ABI, said: “Insurers appreciate that these are difficult times for many households grappling with the rising cost of living.

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“While auto insurers, like many other industries, face higher cost pressures that are becoming increasingly difficult to manage, they will continue to do everything they can to keep auto insurance as affordable as possible.”

The ABI said more than 18 months of rising costs in the used car market have contributed to rising costs for insurers. Garages are also facing the same semiconductor shortages that are affecting the entire automotive industry, and the cost of raw materials such as paint has also increased. The increasingly high-tech nature of automobiles and the time and component costs involved in repairing them are also driving up the cost of insurance claims.

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How to reduce your car insurance costs

As policy costs rise amid the ongoing cost-of-living crisis, there are a few simple steps you can take to save money on your auto insurance.

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  • Take a look: Although the cost of new policies increases faster than renewals, everyone’s circumstances are different, so it’s always worth comparing offers before committing to a policy.
  • Prepayment: In most cases, you can choose to pay your premium in one lump sum or spread the cost over a year. Generally, there are additional costs associated with paying in installments, so pay the entire bill up front if you can.
  • Check your mileage and usage limits: how far you drive each year affects how much you pay and especially post Covid many of us don’t drive as far as we used to. So check the estimated mileage if you can. If you don’t use your car to get to work, turn off the option to commute when you use it, it might help save costs.
  • Scratch the extras: Insurers will always try to convince you to include extra coverage for things like lost keys, rental cars and breakdown cover. All of this adds to your premium, so consider whether you need it or whether you can get services like breakdown protection cheaper elsewhere.
  • Increase your deductible: A higher voluntary deductible often helps reduce premium costs. Just make sure you can afford the additional costs in case you do need to make a claim.
  • Add a named driver: Sometimes, especially for young drivers, adding another more experienced driver to your policy can actually reduce costs, so it’s worth considering. On the other hand, young, inexperienced drivers or those with motor beliefs will drive up the cost, so don’t add them if you can avoid it.
  • Change your workplace. Some jobs cost more than others, and while you can’t lie about your job, you can be smart with the title or description you use to get a better deal
  • Think telematics: Telematics, or black box insurance, uses an in-car tracking device to monitor your driving behavior. It all sounds a bit like Big Brother, but it can bring lower premiums, especially for young drivers.