The cost of car insurance remains high and motorists are continuing to see hikes when they come to renew.
Analysis by comparison website Go.Compare - based on car insurance quotes and policies purchased through the platform - shows that the average cost of motor cover as of the end of the second quarter of 2024 was £456, up 23% compared with last year.
In some good news, wider data from the Association of British Insurers (ABI), suggests the average price paid by motorists for car insurance has now come in at £622, which is a 2% drop from the previous quarter when premiums cost nearly £635. It’s the first time car insurance premiums have fallen in two years.
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Why has car insurance gone up?
One of the biggest factors pushing up car insurance premiums was previously inflation.
But it is no longer the biggest contributor.
ABI data shows that premiums have risen due to a hike in the cost of claims made by drivers, up by 18% and costing nearly £2.5billion. On top of that, repair costs have also surged, totalling £1.9billion for spare car parts and labour.
The amount you pay for car insurance can also depend on where you live.
Go.Compare says greater London continues to be the most expensive place to insure your car with premiums costing an average of £662. That is 80% more than the average cost of a premium in Wales, where drivers pay the lowest car insurance premiums in the UK at £366.
The industry has been in the spotlight this year after the Labour government pledged in its election manifesto to tackle “out of control” car insurance premiums.
Rocio Concha, director of policy and advocacy at Which?, said, “It’s encouraging to see premiums starting to fall, and motorists will certainly hope this trend continues. However, with premiums rising significantly over the past year, many drivers opening their renewal quotes will still get a nasty shock.
“To make matters worse, drivers who can’t afford to stump up for annual cover all in one go, and instead pay monthly, can end up paying hundreds of pounds more over the course of a year due to the high levels of interest charged on payments.
“The Financial Conduct Authority must clamp down on insurers penalising poorer motorists by setting out a clear timeline for when it will stop firms charging excessive rates of interest on monthly payments, as well as publishing a league table of firms, naming and shaming the worst providers.”
We’ve put together a list of ways that you can cut your motor insurance premium, potentially saving you hundreds of pounds a year.
1. Pick the right level of cover
Insurance is essential to drive in the UK, but there are varying levels of coverage. Depending on your needs, you may be able to get a cheaper deal with a different form of cover, but it is essential to determine what kind of cover you need. Remember, the least comprehensive cover isn’t always the cheapest. Here’s an overview of insurance cover definitions:
- Comprehensive: Comprehensive car insurance is the highest level of cover available. A comprehensive policy covers you, your car, other people and their property, meaning the insurer should have your back if you run into a problem.
- Third-party, fire and theft: This form of policy will not protect you or your car in an accident that was your fault, unlike comprehensive cover. But as the name suggests, it will cover you for fire damage, theft or attempted theft. Passengers are protected under the policy, plus any people or property that may be affected by an accident that you are responsible for.
- Third-party: This is the minimum level of cover required to drive in the UK. This form of cover does not allow you to claim for any damage to your own car or person but does cover damage to other cars and injuries to other people and their property.
You should check the cost of each type of cover carefully – don’t assume that third-party insurance cover will be the cheapest. The latest data from Go.Compare reveals that third-party premiums are the most expensive on the market at the moment, on average.
The cost of coverage depends on a huge range of factors, from the vehicle you drive, and how you drive it, to your age, occupation and where you live. With this in mind, people with third-party coverage are more likely to lodge claims due to driving older cars, being young drivers or having driving convictions.
So, if you have a car you’re keen to look after, comprehensive cover may offer you better protection at a better price.
2. Consider black box insurance
Commonly associated with new and younger drivers, black box policies sometimes called telematics, will see your insurer mount a small device to your car.
Often used in conjunction with an app, the black box monitors how you are driving, including your speed, how sharply you use the brakes and what time of day you tend to travel.
The idea is it encourages drivers to be more careful, thereby reducing risks on the road. These policies tend to get cheaper over time – the more careful you are, the more your premiums will drop.
3. Protect your no-claims bonus
You can save around 60% of your car insurance costs by maximising your no-claims discount. This is a deduction given to you by your insurer for every year where you don’t lodge a claim.
But, of course, accidents happen and it can take a long time to build up the bonus. That’s why many insurers offer to protect your no-claims bonus for a fee, in the form of a small additional premium.
4. Pay upfront to avoid paying interest
Paying your car insurance annually is almost guaranteed to be cheaper than spreading the cost over 12 months.
When you sign up to pay in monthly instalments you are, in essence, taking out a loan (with interest added) from the insurer. The amount you can save varies from provider to provider, but somewhere between a 10-20% saving can be expected.
5. Never auto-renew
If you decide to auto-renew, you will likely end up missing out on a discount. While it may seem as though you’re saving time and hassle by renewing with the same insurer, you forgo the opportunity to shop around for better offers and prices.
As long as your fixed-term deal is nearing its end, you are free to shop around and can switch to another provider. It’s also worth seeing if your current provider will offer you a deal or match an offer from elsewhere.
You can shop around for the cheapest quotes on comparison websites such as Go.Compare, MoneySuperMarket or Compare the Market.
6. Cut back on unused extras…
Some policies include extras that you may not need but are paying for. For example, you may no longer need European cover or windscreen cover – two common extras that can bump up the price of your policy. When it comes to renewing your coverage, take a look at what you’re paying for and remove any extras you aren’t using.
7. …or get them cheaper elsewhere
Along the same lines, see if you can get your add-ons for cheaper elsewhere. For example, you can get a specific policy to cover damage to your windscreen. This could be cheaper than getting it as part of a bundle with your motor insurance. The same is true for add-ons like legal assistance and courtesy car cover. It is well worth shopping around to see if there’s a cheaper deal out there.
8. Make your car more secure
Improving the security of your vehicle could encourage insurers to offer you a better rate.
Steering locks and immobilisers are two of the most common ways of deterring thieves, and while both come at a cost, the expense of fitting security updates could be worth it should your insurer decide to reduce your premiums as a result.
Your location also affects how much you pay for your car insurance. This includes what city you live in and where you park your car. If you have a garage or driveway, your car insurance is likely to go down a little, as they are deemed as safer places to park a car.
Remember, you should always be truthful when telling your insurance provider where you live. If the information you provide isn’t accurate, you risk invalidating your cover.
9. Take an advanced driving course
Pass Plus is an optional course drivers can take and, with some providers, it will qualify you for a discount on your insurance. While it’s typically meant for young and inexperienced drivers, there’s no reason why anyone can’t take advantage of the potential savings on offer.
Some insurers will take the course into account when setting the cost of your coverage, but not all will. It’s worth getting in touch with your provider to see if the cost of taking the course will be worth any discount you receive.
10. Renew at the right time
The best day to renew your policy is 26 days before it is due, according to the latest data from Go.Compare. The reason is that the price tends to increase the closer you get to your renewal date.
Another reason why it’s great to lock in a price early is that insurers can change their prices at any time, and for seemingly no reason. You may be searching a price comparison site one day, see a good offer and go back to claim it a few days later to find the price has been hiked.
To avoid this, be prepared to jump on a deal as soon as you see it – it could save you money down the road.
11. Drive less, if you can
When you apply for car insurance, you will be asked how many miles you drive on average in a year. This is because, statistically, the more often you are on the road, the more likely you are to be involved in an accident. If you are able to reduce your mileage by using public transport or walking shorter distances, you will probably be able to bring your costs down.
12. Be careful when selecting your job title
The job title on your insurance application has a big impact on the cost of your insurance. For example, research from Vanarama, part of the Auto Trader group, shows that traders and mechanics pay far more than chefs, accountants and financial analysts. Graphic designers have seen the biggest hikes (66% year-on-year), while those working in HR currently pay the lowest overall price.
It’s important you don’t lie when you record this information, as any incorrect information could invalidate your insurance. However, if there are very similar job descriptions that do match your role, it’s worth checking whether selecting one over the other changes the cost of your premium. Money Saving Expert has a handy job picker tool that you can use to check.
13. Add an extra driver to your policy
Sometimes, adding another driver to your car insurance policy – called ‘named driver insurance’, can help bring your premiums down. This is especially the case if you’re a young driver or student or you recently passed your driving test, and have added a more experienced or older driver to your policy. It also gives you peace of mind that your car is protected if an emergency takes place while someone else is driving it and gives the other driver the benefit of any extras you have on your policy, such as breakdown cover.
Remember to be honest with your insurer about any convictions you or your named drivers have, as it could affect how much you pay for your premium.
14. Choose your car carefully
Every car fits into one of 50 insurance groups that help insurers decide how your premium will be priced. So if your car has a small engine, it will be placed in a low insurance group with cheaper premiums. The more expensive a car, the higher the insurance group.
That’s not the only deciding factor for premiums – where you live and your driving history also play a huge role when quotes are calculated. But it’s worth checking what car insurance group you fall into before buying a car.
15. To modify or not to modify?
If you modify your car, you will need to notify your insurer, and potentially pay extra for your policy. But this will depend on the type of modification you do.
While small upgrades like roof bars may not impact the price you pay, any major styling, audio or performance changes can really hike up your insurance costs. Think large spoilers or exhausts. Not only that, they could make your car more valuable, expensive to repair and at a higher risk of being stolen or vandalised.
If you do modify your car, it’s important to let your insurer know. That way, the quote you receive reflects the modifications and you have the right level of cover.
16. Watch out for extra fees
There are many reasons why car insurers can charge you administrative fees – such as you moving house, changing jobs, getting married, cancelling your policy or modifying your car. This fee is on top of your premium and can be around £50.
Do let your insurer know when you make any major changes in your life, otherwise you may risk being stung by excess charges or even invalidating your policy.
Some policies may cover these admin charges at a slightly increased premium. It’s worth checking if this increase will work out cheaper for you than if you have to pay a larger fee to make changes on a policy that doesn’t include this. Check the terms and conditions to see exactly what you’re signing up for.
17. Consider pay-as-you-go insurance
Pay-as-you-go car insurance is a type of cost-effective insurance cover for young, or infrequent, drivers who can’t afford high premiums.
If you travel under 7,000 miles per year, it might be worth looking into this type of cover. There are three types of coverage:
- Pay-per-mile: This type of car insurance means that you’re charged for every mile you drive. You pay a base rate for your insurance cover, after which your miles are tracked every month. It can work out cheaper for those who don’t drive quite often.
- Telematics: Also known as ‘pay how you drive’ insurance or ‘black box’ insurance, it uses a small GPS device that tracks how fast you drive, how quickly you brake and how safe you are as a driver. The better your driving performance, the more chances that you will be rewarded with cheaper insurance, discounts or cashback.
- Pay-per-hour: It’s similar to pay-per-mile but instead of counting how many miles you drive, you’ll be charged based on how long you spend driving.
You will be charged a set monthly or annual fee that covers your car against damage, and after that, how much you pay depends on your mileage.
It’s worth noting that this type of cover isn’t suited for everyone. For example, if you regularly use commercial vehicles or are a new driver with poor driving performance, you may be deemed ineligible for this type of policy.
18. Drive safely!
Any driving offences that result in penalty points on your licence will need to be declared to your insurance company. As your points increase, so will your premiums. Once you reach 12 points within three years, you’ll be disqualified from driving, and your insurance will increase further. Bear in mind, though, that some companies won’t insure you at all, as you will be deemed a high-risk driver.
It’s also worth noting that gaining penalty points on your licence won't directly affect your no-claims bonus. You can only lose it if you make a claim or someone else makes a claim against you. In that case, if your insurer pays out, your discount typically reduces by two or three years.
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