Risking cheaper car insurance for peace of mind?

Andrea Sophocleous investigates if cheaper comprehensive car insurance is worth the risk.

February 8, 2010

The excitement of buying a new car can often be dampened by the harsh reality of drudging through myriad car insurance options to find the best one for you. As well as not being an enjoyable task, researching insurance schemes can be daunting.

Approaching the search for car insurance with a clear idea of what you need, can help minimise the stress. All car owners are required to pay for compulsory third party insurance when they register their car. This covers injury and death to people in car accidents. Third party property insurance covers any damage you cause to other people’s property, but not repairs to your car. It also doesn’t cover car theft.

Third party, fire and theft insurance offers limited cover for theft of your car or damage from fire, but it does not cover the cost of repairs if your car is damaged in an accident. The safest option, comprehensive insurance costs the most but gives you the most cover. It covers you against accidents, theft and fire damage, and extras can include a replacement car while yours is being repaired.

When shopping around for any type of insurance, it’s tempting to opt for the cheapest policy. However, this isn’t necessarily the wisest move. The low cost of the premium may be attractive, but what about the excess you will have to pay if you make a claim?

Generally, the lower the premium the higher the excess. If you are willing to pay a high excess, this may not be an issue for you – but it’s a decision you will have to make before signing up to a policy.

The cost of the premium is simply one consideration when choosing a car insurance policy. You should also consider the valuation of your car by the insurance company – is it a fair value? Is your car worth more than the insurer is willing to agree?

You must also look at the policy’s terms and conditions (what is covered), as well as any exclusions (what is not covered by the policy). Different insurance policies carry different exclusions, so it’s important to read the fine print. Discounts for loyalty or having multiple policies with the insurer should also be considered.

The best way to lower the price of your premium is by being a responsible driver. Some insurance companies offer a “no claim bonus” on car insurance. If you don’t make a claim by the time you have to renew your policy, the insurer may reduce the premium you have to pay because you are a good “risk”.

A cheaper insurance policy can come with fewer options – is this what you want? More options may mean getting the cover you desire and the peace of mind you need.

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