Cheap Auto Insurance - 10 Crucial Tips For Traveling Teens And Petrified Parents

Cheap auto insurance can cost you a bundle if you don't keep a few crucial tips in mind. You have to do your homework to ensure that you understand the fine print - especially if you have a teenager on the verge of discovering the joys and freedom of driving. You don't want to discover too late that your cheap auto insurance policy doesn't provide coverage for a young driver...

It is an unfortunate fact that teenagers cause a spike in claim rates. Research has shown their accident rate to be up to ten times as high as that of older, more experienced drivers. This high risk group has a direct effect on quotes. The premium can almost double in some instances. Fortunately there are ways to soften the blow as far as your cheap auto insurance package is concerned.

1. Type Of Vehicle: While choosing a low risk vehicle for your teen may have you out of the running as far as the popularity contest is concerned, it will affect your insurance quote significantly. Companies frown on an   expensive, fast sports car with a teenager behind the wheel. Don't dangle temptation in front of your teen. Choose that older, heavier car and you will qualify for a much lower premium, as well as a measure of peace of mind. Get a list of the no-go wheels from your insurer.

2. Driving History: Try to get your teen to understand that their driving history is just as important as their credit history. Avoiding a black mark in any shape or form is vital. Don't claim for small mishaps. Tickets for speeding are a no-no.

Passing a course at a reputable driving school will also enable your carrier to see the teen as less of a risk. Why not join your child in a Defensive Driver Program, in order to qualify for a cheap auto insurance discount? This will equip both of you to cut the risk of rear-end crashes, while teaching you and your teen to use emergency brake procedures correctly, to use safe following distances, and to drive safely in foul weather.

Expecting your teen carry his or her share of the coverage is a great way to create a careful driver and teach responsibility.

3. Avoid Distractions: Teach your teen to concentrate on driving and driving alone when in the car. No distractions are allowed. No cell phone calls. No fooling around with passengers. In fact, putting restrictions on carrying passengers during the first year or so of driving is probably sensible and can help to get you cheap auto insurance. In some states teens are now barred from carrying more than one passenger. It has been proven that having three or more passengers makes the driver up to three times as likely to be involved in an accident. The new laws also prohibit driving during the dangerous late night and early morning period. This already seems to have a beneficial effect on premiums.

4. Seat Belt Safety: Seat belt use is without question one of the most vital aspects of driving. Your teen must know that his wheels will be confiscated if he ever drives without wearing a seat belt. This also applies to passengers. By signing a seat belt wearing undertaking, you may increase your chances of landing cheap auto insurance.

5. You Are The Role Model: Remember that you are your teen's role model when it comes to driving. If you don't stick to the rules, you can't expect your kids to do so. Your example over the years will play an important role in the way they approach their own driving later on.

6. Change Driver Status: Your teen may qualify to be an occasional driver, which will draw a lower premium. At first it will also be less expensive to have teens covered under your personal protection plan. They can change to their own plan later on, once they have established some sort of record.

7. Liability Coverage: Never, ever try to save on liability coverage when taking out cheap auto insurance. This is absolutely vital. If at all possible get a comprehensive umbrella policy. This will give you a huge cushion in case of a serious accident. It is astonishing how costs can add up if such an unfortunate incident occurs.

8. Get Good Grades: A number of companies allow generous discounts of up to 25% for good grades! Make a B average or higher a provision for allowing your teen on the road.

9. Company Car: If you have your own business, your teen may be able to use the company car without you
being slapped with a higher premium. Investigate this possibility.

10. Carry-Over From Your Teen: An important fact that is often overlooked is that your teen's carelessness or risky behavior may bump you into the high risk category with sky-high premiums! Your kid has to understand that his or her driving record is serious business, likely to affect the whole family. If not handled with responsibility, it may void your chances of ever getting cheap auto insurance.

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10 car insurance myths

Our guide reveals the facts behind 10 common misconceptions about car insurance

Car insurance can be confusing, and it’s made even more so by the myths circulating. You need to know the facts from the fiction or you could find yourself overpaying, or worse — without the cover you need to drive legally. Read on to find out the truth behind 10 common car insurance myths.

Myth 1: Third party cover is always cheaper than comprehensive

The truth: While it might seem logical that a lower level of cover would cost less, this is often not the case. Drivers who opt for a lower level of cover typically have a history of making more claims, which has driven up the cost of these policies.

For many drivers, comprehensive cover can cost the same or even less than third party only or third party, fire and theft cover — with the added bonus that your own vehicle will be covered for damage. You can read more about this in our guide.

Myth 2: My premium should go down or stay the same each year if I don’t claim

The truth: In an ideal world this would be the case — after all, you’re building up a no claims bonus every year you don’t claim. However, there are many external factors at play that affect the cost of insurance across the board. 2017 in particular has seen many changes that have driven up prices for most motorists.

It’s also worth bearing in mind that most insurers have a maximum no claims bonus, so you’ll stop building a discount after a set amount of years. Insurers will also take your age into account, so once you reach a certain age you will be considered a higher risk and might see your premiums rise. You might also notice your premium changes if you make any adjustments to your policy, such as changing your job or address.

Myth 3: No claims bonus protection will stop my premium increasing

The truth: Many people think paying extra to protect their no claims bonus will prevent their premium from increasing if they make a claim. But like many things relating to insurance, it’s not that simple.

While you won’t lose your no claims bonus if you make a claim and you’ve paid to protect it, your premium itself could still go up as your insurer might perceive you as a higher risk. As your no claims bonus is a discount applied to your premium, the amount you pay at renewal might still increase. And there’s a limit to the protection offered – if you make more than one claim in a year, you might find that your insurer removes a year or two’s bonus (but you’ll likely still be better off than if you had no protection and lost your whole discount). You can find out more in our no claims bonus guide.

Myth 4: I won’t have to pay excess if a claim wasn’t my fault

The truth: If you make a claim that wasn’t your fault (e.g. if a third party crashed into you at traffic lights), your insurer will usually waive your excess if it can prove you weren’t at fault and it’s able to claim its costs back from the third party. However, you’ll be responsible for paying your excess upfront even if you’re later entitled to a refund, so make sure you select a policy with an excess you can afford. You can read more about car insurance policy excesses and how they work here.

Myth 5: Comprehensive cover allows me to drive any car

The truth: It’s a common misconception that having comprehensive cover on your own vehicle automatically covers you for third party liability when driving someone else’s car. In fact, this used to be a standard feature of comprehensive policies, but it’s now offered by fewer insurers.

Some comprehensive policies do include this, but it’s important to check your documents rather than assuming you can drive another car. Look out for ‘driving other cars’ (DOC) cover in your policy — and bear in mind that even if you have this included you will only be covered for third party liability so won’t be covered for any damage to the car you’re borrowing. Read our guide to find out more.

Myth 6: Young drivers should get insurance in a parent’s name

The truth: Many parents want to help their children out financially, and might consider taking out insurance in their name or putting themselves as the main driver to cut the cost of their child’s insurance policy.

But while it might seem like a legitimate loophole, putting insurance in someone else’s name to get cheaper cover is known as fronting and is a form of insurance fraud. Fronting is illegal and has serious consequences, including penalty points, disqualification, and fines of up to £5,000 if the case is taken to court. You can find out more in our guide to fronting.

Myth 7: Black box policies have a curfew

The truth: Most black box or telematics policies no longer have set curfews. While this was a feature in most early black box policies, insurers have moved on and most now base premiums on driving behaviour such as mileage, speed, braking and accelerating.

While driving at night may affect your driving score on some policies, there are now very few black box policies that restrict the times of day you can drive. This is far from the only misconception about black box policies — in fact, we’ve rounded up some myths specifically about the technology here.

Myth 8: I don’t need to insure my car if I don’t drive it

The truth: Since Continuous Insurance Enforcement (CIE) came into effect in the UK in 2011, all cars must be insured unless they have been declared off-road with a Statutory Off-Road Notice, known as a SORN. You can only SORN a car if it’s kept off the road on private property — for example on a drive or in a garage. If it’s kept on a road but never used, you still have to make sure it’s covered for at least third party liability. You can read more about SORN requirements in this guide.

Myth 9: Paying monthly is a cheap way spread the cost of cover

The truth: While it might seem sensible to spread the cost of insurance with monthly payments, it almost always costs more in the long-run.

Most insurers will charge an upfront deposit as well as interest, making your premium cost much more over the year. While it can be difficult to find money for a year’s cover upfront, paying in one go usually works out much cheaper. Our guide to annual and monthly payments explains more.

Myth 10: It’s best to let my policy automatically renew each year

The truth: There are no prizes for staying loyal when it comes to car insurance, as you can often find a cheaper deal by shopping around. While you might be tempted by the convenience of letting your insurance policy renew, it could be costing you dearly.

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Insurance premium tax

The 2016 Autumn Statement announced a further rise in insurance premium tax (IPT), but what is it and how does it affect insurance costs?

In the latest Autumn Statement on 23 November 2016, Chancellor Philip Hammond announced insurance premium tax (IPT) will increase from the current rate of 10% to 12% in June 2017.

What is insurance premium tax?

Insurance premium tax is charged as a percentage of insurance premiums across most general insurance products, including car, home, travel, pet and private medical insurance. Other types of insurance, including life insurance, are exempt from the charge.

IPT was introduced in 1994 to raise revenue from the insurance sector, which was then viewed as being under-taxed. The rate of IPT stood at just 2.5% when it was first introduced.

While IPT charges remained stable until 1997, the rate has increased nearly fivefold since it was introduced, with more dramatic increases being introduced in the last few years.

The treasury has described IPT as a tax on insurers, and pointed out that it is up to insurers whether to pass the costs on to customers. However, in most cases, IPT is added to customers’ premiums and any increases will directly affect the price they pay.

Because insurance premium tax is a flat rate across all policies, people with the highest premiums are most affected by IPT. For car insurance policies this impacts inexperienced drivers, and for home insurance people who live in high-risk areas are likely to pay the most IPT.

Latest rise in IPT

Chancellor of the Exchequer, Philip Hammond, announced a further increase to insurance premium tax in his first (and last) Autumn Statement on 23 November 2016.

The rate will rise to 12% from June 2017, from its current level of 10%.

The current rate was brought into effect in October 2016, after rising from 9.5%. The tax rate previously jumped from 6% to 9.5% in 2015.

The new rate in June will mark the third increase in 18 months, with the rate of IPT doubling in that time period.

Despite the sharp increases in recent years, the rate of IPT in the UK remains lower than in many other European countries. The current 10% rate is the eighth highest in the EU, and June’s increase will take the UK to sixth position.

What does it mean for insurance costs?

Insurance premium tax affects an estimated 25 million car insurance policies and 25 million home insurance policies throughout the UK.

According to the Association of British Insurers (ABI), the tax increases introduced between 2015 and 2017 will add more than £25 a year to the average comprehensive car policy and £19 to combined building and contents cover.

The best way to save on your insurance costs and beat any price rises is to shop around for a better deal. With uSwitch you can compare quotes from different providers in just a few minutes.

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