Beware of the 'cheap' motor insurance

Wednesday 05 December 2012 11.06
The cheapest isn't always what you end up with when buying insurance
The cheapest isn't always what you end up with when buying insurance

Buying car insurance used to be simple. These days the it's all about tailor-making your own policy with add on extras. So beware of the headline 'cheapest' offers when renewing.

Premium for women set to go up

The single biggest change in motor insurance is the change that will affect women drivers.

Premiums for most women may see small increases from December 21 following a European Court of Justice decision made last year which ruled it was unfair using gender as a rating factor in the calculation of insurance.

It is anticipated that this will be good news for males between 17 and 24 – traditionally seen as the most risky, and therefore most expensive to insure. Their premiums are set to drop but women in this age group will no longer benefit from drivng statistics which show they are involved in fewer accidents.

The ruling may also have a knock-on effect to a parent’s premium for example, where their daughter or son is a named driver on their policy.

For older men where the gender risk is less, there may be a slight drop but nothing too great.

However most women may see small increases across the board but women aged between 17 and 24 may see their premiums rise massively to match their male counterparts.

Know that this change is coming so that you can prepare by ensuring you shop around for the best deal.

Gender currently plays a role when it comes to the cost of your motor insurance premium and if you’re between the age of 17 and 24 and you’re a male you’ll how big that role is. In fact the cost of premiums for males within that age could be double that of a female the same age due to increased risk factors such as increased accident frequency and increase severity of accidents when they do occur. These risks decrease in both genders as age increases so premiums begin to fall and the difference in premium costs between the sexes begins to even out after the age of 30.

What to look for when renewing your policy

• Third-party cover – (basic required by law) this pays out for claims that other people make against you for damage or injury caused by your driving.

• Third-party, fire and theft cover - in addition to third-party cover, you can claim for loss or damage to your own car as a result of fire or theft.

• Comprehensive cover - this gives you third-party, fire and theft cover and also covers damage to your car, no matter who is to blame.

Comprehensive insurance costs more than the other basic cover but also traditionally has included other benefits such as: windscreen and glass cover; cover for damaged or stolen personal belongings; recovery service and emergency breakdown assistance; injury to driver; driving other cars; replacement or hire car if your car is off the road; legal costs.

When you are looking for a quote these elements and more may be included but you should always ask if they are and what the level of cover is. In other words; never assume. However, with some providers there may now be two versions of comprehensive or third party for example, one a higher price that others, so you’ll need to study the difference.

So you may be given an initial basic (low) quote or headline price and then you can ‘tailor make’ the motor insurance policies to suit you.

So be careful not to be drawn in by an initial low price and you need to know what level of cover you want or whether you want to remove certain cover in order to reduce your premium.

This is best explained via the following quotes:

Quote examples

Quotes were sought (online only) for the following customer: 35 year old woman in Dublin, 1lt engine car, 5+ years no claims bonus, no other named drivers, average mileage per annum, no penalty points.

The prices below are not direct comparisons as cover may vary, plus excess varies etc but the quotes give an indication of what the charges can be.

1. Nononsense.ie (FBD)

€302.39 for comprehensive cover. But I then added various “optional extras” totaling €155.47 bringing my new premium total to €457.86. These ‘extras’ were: €61.47 for no claims protection, €10.50 to drive other cars, €26.25 for breakdown assist, €10.50 for car hire, €25.75 for windscreen breakage, €15.75 for personal accident, €5.25 for personal property.

In addition I could reduce the €500 excess to €250 by paying an extra €12.50 or I could choose to reduce my premium by over €20 but have an excess of €1,000 or reduce it by over €37 and have an excess of €1,500.

Initial cost: €302.39

Final cost: €457.86.

2. AXA

€333.17 for comprehensive. Plus ‘extras’ the total came to €518.20 with a €500 excess or €542.92 with a €250 excess. (I could also reduce my excess when claiming by €100 if I chose an AXA approved repairer). Extras were: €30.58 for motor rescue, €3.67 replacement car, €15.38 for legal expenses, €40.69 for no claims protection, €32.55 for open driving, €30.58 for injury to driver. 10% discount offered for buying online.

Initial cost: €333.17

Final cost: €518.20

3. AA Ireland

€281.68 with no claims protection / €314.46 with full bonus protection (as opposed to partial or set-back protection) for comprehensive cover. Includes general cover i.e. windscreen, breakdown etc. €20 discount for buying online. Follow-up call from agent promised to better quote received online.

Initial cost: €281.68

Final cost: €314.46

4. 123.ie

€296.20 for comprehensive cover. Add €25.20 for full no claims bonus protection so new total is €321.40. This included breakdown assist, medical expenses, personal belongings, accidental damage and more. I could reduce premium by just over €20 if I increased the excess from €300 to €450.

Initial cost: €296.20

Final cost: €321.40.

How to save money on your premium

First the best advice is not to just look at the premium price and make a decision based on that. As can be seen from the quotes above you should also always take into account what cover is included, the level of that cover and the excess to be paid.

Once you have made up your mind on what you need, then look at ways of saving.

o You could pare back on the cover and take out the cover for no claims protection saving around €20 to €40 or opting for a higher excess saving €10 or €20. You could consider removing cover for windscreen damage, injury and more. This is all possible but is it the best idea?

The result would be a cheaper premium but be very careful and make sure you understand exactly what you are buying and that in some circumstances you may be unable to make a claim due to lack of cover or it may not be worth your while to i.e. if you lose your no claims protection. But bear in mind that even an ‘all inclusive’ policy may still be better value that a paired back version without the add-ons so never assume.

You could opt for third party cover only rather than comprehensive which would save you around €40 on the premium cost. Again, this is a decision about level of cover that only you can decide.

Interestingly, this Is not something that many customers are considering if we take into account a survey carried out by AA Ireland this year. They asked if people had switched from fully comprehensive to third party or third party fire and theft and the clear answer was that an average of only 5.4% had, although this number rose to 12% in the 17-24 year old category.

Another way to save is to look for discounts for booking online (i.e. €20 for AA and 10% discount from AXA). Don’t forget also to check on cash-back sites to see if there are any motor insurance offers. Currently via fatcheese.ie there is €30 back on AA motor policies.

Check online for quotes as an indicator but it’s generally best to actually talk to a sales agent in a particular insurance company to make sure you understand the elements of the product on offer and have all the cover you need. You can also go back to book online if an online discount is offered. In addition, ask the sales agent for a discount and reference other quotes you’ve got assuming they’re better.

o Or you could choose to use an agent, as they may be able to get you a better price given their buying clout. In addition they should be able to assist when it comes to ensuring your needs are covered, and in knowing what’s on offer across all or most of the market.

What you can’t control

Apart from elements you choose to include in your cover, what level of excess you want and whether you opt for third party or fully comprehensive, there are other elements that effect price that you have less control over or no control at all.

For example your profession may be important as is whether you have penalty points and what distance you drive per year and so on. But what county you live in also plays a role as does your age.

Your address matters

Insurance brokers aoninsure.ie has just published the first of what will be quarterly figures giving a snapshot of average motor insurance prices across the country. The figures show clearly that the same customer will be charged a different premium depending on where they live. This is due to certain parts of the country experiencing more accidents and / or more claims resulting from accidents, serious accidents, damage, theft etc

According to their figures, a 21 year old female student would pay an average €1,031 in Cork but €1,115 in Dublin. A 45 year old female would pay an average €295 in Waterford but €331 in Kildare. Meanwhile a 21 year old male could pay €2,160 in Dublin but €1,918 in Waterford and a 55 year old male would pay an average €346 in Wicklow or €296 in Waterford.

Recap: Top Tips

1. Decide what your priority is: the amount you pay or the type and level of cover. You can reduce your premium by reducing your cover, in other words in general you pay less you get less.

2. But you owe it to yourself to get the best for what you want to pay and you can find a policy that may be €100 or even €300 cheaper with equivalent cover. So it is crucial to do your research.

3. Don’t forget to look for discounts for buying online for example, and also ask for discount too.

4. Use an online quote as an indicator, then double check everything and ask plenty of questions by calling and talking it through before you make a decision.

5. Consider using a broker if you feel you need further support and advice.