What car insurance options are available?

Broadly there are three types of car insurance available in the UK:

- Third party only (TPO) – Covers injuries to others and damage to their property. It will also cover accidents caused by passengers or by caravans or trailers attached to the car.

- Third party fire and theft (TPFT) – As per third party only but with the addition of fire damage and theft cover.

- Comprehensive cover – This offers the most protection but policies will vary from provider to provider depending on the options you choose.

In addition there are specialist policies available for new drivers, older drivers, female drivers and drivers of specialist vehicles such as classics and high-performance cars. These policies may offer unique benefits, for example handbag cover and child seat cover for women drivers and agreed valuations and limited mileage discounts for classic cars. However, they are not necessarily the cheapest.

How do you choose a car insurance policy?

Before shopping for car insurance familiarise yourself with some common car insurance terms. Here are a few examples:

- Excess
An excess is what you are liable to pay towards any claim. There are two types of excess: compulsory and voluntary. The former is set by your insurance company when you take out a policy, whilst the latter is what you choose to pay in addition to the compulsory excess. Generally, the higher your voluntary excess, the lower your premium will be.

- Exclusions
Most policies will feature key exclusions i.e. areas that the policy will not cover. These will be outlined in your policy documents.

- No-claims bonus
The `no claims bonus` is a reward for people who don`t make a claim on their policy. Insurance companies will usually give a discount for claim free driving.

- SDP
An acronym for “social, domestic and pleasure” this covers you for day-to-day driving such as to the shops or to see relatives. Your insurance will not cover you when driving to and from your place of work unless it includes “SDP and commuting”.

From there, decide which options you want to include on your policy. For example, will you require a courtesy car if your vehicle is involved in an accident? Do you want accidental damage cover? What about cover for your windscreen, or legal assistance?

Remember that most car insurance companies will not match the level of cover you have in the UK if you take your car overseas – instead they will simply offer a “Green card” which means you have basic (third party only) cover when abroad. If you want more protection then you must contact your insurer directly to request it.

Which car insurance provider should you choose?

According to a comparison website`s research, Swiftcover and Kwik-Fit are the cheapest car insurers on average in the UK with typical quotes averaging £277. However, they may not be the cheapest for you based on the risk you present and the level of cover you require. Remember that the cheapest policy is not always the best value policy, so the key is to shop around with a car insurance comparison website to find the right deal for you based on the level of cover you require and the price you`re willing to pay.

By Eric Peters, Automotive Columnist

Ever wonder why car insurance premiums are so high? Even if you’ve got a clean driving record — no accidents, few tickets — it’s not uncommon to be shelling out close to ,000 annually to cover the nut for a full coverage policy on a late model car.

Over the course of five or six years, you might be spending an amount to insure your car that’s comparable to what an entire new car itself cost 20 or 30 years ago.

So — aside from outright gouging — what accounts for the major mark-up in car insurance costs?

Here are a few of the reasons:

Fixing Late Model Cars Is Massively Expensive

According to the Alliance of American Insurers (a trade group for the insurance companies), the cost to rebuild a ,000 car using individual replacement parts would cost more than ,000. If you’ve ever gone to a dealership to buy a part for your car, you’ll know all about this.

The per-piece cost of replacement parts is orders of magnitude more than the cost of buying all those parts together (in the form of a fully assembled brand-new car).

Also, even minor accidents today can result in major damage, bottom line-wise. Most new cars, for example, have fairly delicate front and rear “fascias” (what we used to call “bumpers”) made of a flexible plastic or composite material that is easily ripped or otherwise ruined — and often not possible to repair.

One must instead replace the entire nose piece (or tail section). Expensive. And these parts don’t come ready to install, like the old-style chrome bumpers of the past. Usually, they must be prepped and painted — adding another layer of cost to the repair. “Little parts” like today’s multi-faceted headlamp “assemblies” can cost hundreds of dollars to replace, too.

Air bags are another example. They are “one use only” — and if they deploy in an accident, they (and often, the entire dashpad/steering wheel) will have to be replaced. This alone can amount to several thousand dollars — before bodywork or paint is even factored into it.

Today’s cars are also more valuable, on the whole, than the cars of the past. Circa 1979, few new cars cost more than ,000 — brand new. Today, it is not uncommon for ordinary family-type vehicles (such as a well-equipped minivan, for example) to cost upwards of ,000.  Vehicles costing ,000 or more are fairly common.

We all pay more for insurance as a result, since the amount of potential losses the insurance companies are covering is so much higher than was formerly the case.

Medical Liability And Lawsuits

Anyone who has been near a doctor’s office lately is aware that even a routine check-up isn’t cheap. As health care costs have risen across the board, insurance companies have transferred them to us via upticked premiums. One really serious or permanently disabling injury — or faked case of “whiplash” — can run into the six figures faster than OJ used to run through airports. According to the Bureau of Labor Statistics, the consumer price index for health care skyrocketed by 18.7 percent from 1994 to 1999 alone.

Since ‘99 it’s probably gone up another 18 percent. (That sound you’re hearing is the sound of your wallet being emptied out.)

Uninsured Motorists

Lots of people are driving around without any insurance at all — even though the law requires all motorists to carry at least minimal coverage on every vehicle they own.

No one can say how many uninsured motorists are out there, but everyone agrees the number is increasing. The massive influx of illegal aliens has contributed mightily to the problem. They just don’t care — because there are no consequences… for them, that is.

When one of these clowns hits you, guess who’s left holding the proverbial bag?

Fraud

As much as many of us suspect we’re being ripped off by our insurance company, there’s no question at all that the insurance companies themselves are being ripped off left and right — to the tune of billion per year, according to the Insurance Information Institute.

Faked claims, BS injuries — the cost of hashing it all out in court — we all end up footing the bill.

So, as much as the insurance companies are sticking it to us, they’re also getting stuck by all the scammers out there, by the ever-escalating cost of settling claims, fixing cars and trying to make a buck off the whole deal. And as it turns out, a buck is just about what they are, in fact, actually making.

According to Liberty Mutual, for every 0 you spent on your policy, the company pays out 3.39 in claims and expenses; some 63 cents more goes to federal taxes. If it weren’t for return on investment income (.19 for every 0 taken in) the result would be a net loss.

Liberty Mutual says it ends up with  a net profit of .17 per 0 paid by us in premiums.

If that’s typical, they’re getting screwed almost as hard as we are.

Comments?
www.ericpetersautos.com

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Why Does Car Insurance Cost So Much?

Further Reading:

• Why The Insurance Industry Loves Red-Light Cameras
• Traffic Tickets Are Big Business
• More Silly Numbers From AAA
• How To Objectively Identify Unsafe Drivers
• Should The Driving Age Be Raised To 18?