INSURANCE might seem like an obvious area you can cut costs – but scrimping too much could be a big mistake.
As the cost of living crisis really starts to bite, millions of people are looking for ways to reduce their outgoings.
From downshifting to a cheaper supermarket to checking for the cheapest petrol prices, there are ways to reduce your overheads.
But if you’re thinking that cutting back on insurance is a clever way to save some cash, you might want to think again.
Car insurance is a legal requirement for UK motorists – so you can’t ditch it altogether.
Driving without insurance could get you six points on your licence as well as a hefty fine.
Read more in car insurance
And if you’re thinking of saving money by opting for less coverage, you might want to steer clear too.
Alex Hasty, associate director at Compare the Market, said: “Third-party cover is the legally required minimum level of car insurance that drivers need.
“But our figures show that drivers with comprehensive policies typically pay half as much for insurance as those with third-party cover.”
There are three main levels of cover when it comes to car insurance.
Fully comprehensive gives you the highest level of protection. It covers damage to your own car as well as others, and protects you in the event of fire damage or theft.
With fully comp you can claim for an accident even if you were at fault, or if you don’t know who damaged your vehicle.
Third party, and third party, fire and theft are two alternative types of cover which may be cheaper but offer less protection.
The main problem with these insurances is that they don’t cover your own vehicle.
That means you could be left seriously out of pocket if you’re involved in a no-fault collision or one where you were to blame, or if your car is damaged and you don’t know who did it, for example in a hit and run.
And surprisingly, you won’t actually save any money by opting for less cover.
According to CompareTheMarket, the average fully comprehensive car policy cost £676 in June – but you’d pay £1,007 for third party, fire and theft, and a whopping £1,541 for the typical third party only policy.
The reason for this is that drivers with third-party cover only are more likely to be younger or high-risk drivers.
Alex said: “Third-party policies provide less cover for claims but can cost more as insurers’ risk modelling anticipates that drivers with third-party cover are more likely to make a claim and could claim for larger amounts.
“There can also be less competition for drivers in the third-party market so insurers aren’t fighting to offer the best price.”
What level of cover you need will ultimately depend on your circumstances, of course, but there’s little point paying MORE for a policy that gives you LESS cover.
Car insurance prices have soared in recent months for a number of reasons.
New rules came in banning providers from saving their best deals for new customers, so you can’t save as much as you used to by shopping around.
The soaring price of second hand cars as well as a shortage of repair parts has also pushed up premiums.
The annual premium for a Ford Fiesta Zetec now costs an average of £785 to insure – a massive £129 more compared to the same period in 2021.
There are still ways you can reduce your premiums, however.
Paying for your annual policy in one lump sum rather than in monthly instalments will save an average of £60 a year.
Shopping around using comparison sites lets you compare prices from lots of different providers so you can find the best deal.
Check cashback sites for deals too, as you might be able to get some of your money back on the purchase.
Alex said younger drivers should try and pick a cheaper car when they are buying a vehicle – the value of the car will affect the cost of your insurance, so a high-spec motor will only add to your costs.
He said: “Normally, the bigger the engine your car has, the higher the insurance premium.
“Drivers should also be careful about buying a car with customised modifications such as spoilers or wheel rims.”
Buying your policy in advance will save you too – typically, arranging your cover 23 days before you actually need it to start will get you the best deal.
Those who leave shopping around for insurance until the day they need their policy to start will be charged the most.
Other ways to get cheaper car insurance include tweaking your job title and adding another named driver to the policy.
If you don’t do many miles, you could save with a pay-per-mile policy, where the costs are linked to the amount of driving you do.
Read More on The Sun
We’ve previously rounded up nine of the best ways to cut car insurance costs.
And here’s where to find the cheapest petrol prices according to our latest checks.
