Drivers will be breathing a sigh of relief that soaring car insurance premiums now seem to be firmly in the rear-view mirror, with the price of policies falling over the past year.
Motor insurance prices dropped by 2.4% in January 2025, marking the largest monthly decrease since May 2024, according to the consultancy Pearson Ham Group.
It means car insurance costs have fallen by 18.2% over the past 12 months, with the average price for a policy now standing at £464.
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The news follows a surge in car insurance premiums in 2023, when high inflation pushed up the cost of car repairs. The number of claims also increased as people started travelling more following the pandemic, which led to insurers adjusting their prices.
Why is the cost of car insurance falling?
The drop in car insurance premiums is partly due to inflation slowing in recent months.
Young drivers and elderly drivers have seen the biggest reduction in car insurance premiums. Motor insurance rates for under-26s and over-70s both declined by 2.9% in January, reinforcing a trend of sharper reductions at both ends of the age spectrum, according to Pearson Ham Group.
Regionally, drivers in the North West and London saw the largest premium decreases (-2.9%), while Northern Ireland recorded a more modest decline of -1.9%.
Stephen Kennedy, director at Pearson Ham Group, said: “The market has now seen 10 consecutive months of falling motor insurance premiums.
“The sharpest declines among younger and older drivers suggest insurers are recalibrating pricing, potentially in response to claims trends and competitive pressures. Meanwhile, regional variations highlight how local market dynamics continue to influence pricing.”
Despite the drop in car insurance costs, many drivers still face paying more than they did in 2022. They also have to prepare for a hike in car tax this April, when some rates will double and previously-exempt electric vehicle owners will have to start paying the levy.
With this in mind, 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
Car 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 important to determine what kind of cover you need. 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, as it can actually be the most expensive.
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 them typically driving older cars, being young drivers or having driving convictions.
You should also watch out for insurers offering “stripped back” cover to try and stay at the top of price comparison tables. These policies typically provide more cover than basic third-party, fire and theft policies, but omit many features found in standard car insurance policies. Common exclusions include windscreen cover, stolen key replacement, courtesy cars, and the uninsured driver promise (a guarantee to reinstate no-claims discounts and reimburse excess if involved in an accident with an uninsured driver).
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.
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.
Rocio Concha, director of policy and advocacy at Which?, said: “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.”
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 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, anyone can take advantage of the course and 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 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.
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. If you’re buying a new car, it’s worth checking which car insurance group it falls into before buying it.
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 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.
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.
