How can I reduce the cost of my car insurance?

Find out how to lower your car insurance premiums without reducing your cover.

When shopping for car insurance, there are a number of factors that will affect the cost of your car insurance premiums. You might not be able to do anything about your age or where you live, but there are other ways you may be able to reduce the cost of your car cover. Read our guide to find out how.

Shop around for the best car insurance

One of the easiest ways to lower the cost of your car insurance is to shop around and do your research. Consider whether you’re getting the best deal by comparing the price as well as the cover features. Choosing the cheapest policy won’t necessarily offer you the best deal as there may be features missing that you really need.

Buy online

Many insurers will offer discounts to customers for buying car insurance online. This is often the case for new customers. You’ll need to read the policy details carefully and double check that you have entered all the correct information for you and your car, as you could risk invalidating your insurance if an insurer believes you’ve falsified any information.

Consider your cover level

There are three levels of car insurance on offer:

  • Third party. This is the lowest level of cover needed to be on UK roads. You’ll be covered for damage to third party vehicles or property if you cause an accident. However, it won’t offer any cover if your own car is damaged.
  • Third party fire and theft. This cover level offers the same as the lowest cover level with the addition of protecting your car if it’s stolen or damaged by fire.
  • Comprehensive. This is the highest level of cover available and offers the same protection as the lower levels in addition to offering cover for your own car if damaged or vandalised.

Contrary to what you might expect, comprehensive cover can be cheaper than third party or third party, fire and theft so it’s always worth checking. This is because of the risk profile of many people who get third party insurance.

Build up your no-claims discount

Every year that you drive and don’t make an insurance claim, you’ll be rewarded with a no-claims discount. Depending on which insurance provider you’re with, you can expect to build up between five to eight years of no-claims bonus discounts. While this discount can only be built up over many years, you may be able to protect your big bonus by adding no-claims bonus protection onto your car insurance policy. This will usually cost you an additional amount for the enhanced protection but you may decide this extra small fee is worth it if you risk losing your discount for making a claim later on.

Increase your voluntary excess

Your insurance excess is the amount of money you will need to pay towards a claim. Your insurer won’t pay out for a claim that costs less than this amount. A compulsory excess amount might vary depending on the age of you or your car and your driving experience.

A voluntary excess is usually added on top and can normally be set by you when taking out a policy. You’ll have the option of adding or increasing a voluntary excess, which should lower your premium. Be careful about making an excess too high, as it could leave you out of pocket if damage occurs.

Don’t pay by direct debit

Spreading the cost of your car insurance over the year might help with cashflow issues. However, if you choose to pay by direct debit, you’re likely to be paying for the insurance plus interest on the full amount as well. You’ll end up paying more in the long run so paying for your car cover in one lump sum could actually be the cheaper option.

Don’t auto renew

Don’t be fooled into thinking that you’ll get the best deal by auto renewing on your car insurance. In fact, it always pays to shop around and do your research to compare deals. Consider whether you’ll get a bigger discount as a new customer with a new insurer or whether your current insurer is willing to revise it’s deal and offer a better deal.

Get the right car

If you want to keep car insurance premiums low, you’ll need to carefully consider the car you drive.

All new cars in the UK are given an insurance group rating to help insurance providers decide how to calculate car insurance premiums. The rating essentially tells insurers which cars are the most expensive cars to cover as well as which ones are the cheapest to cover.

There are 50 different car insurance groups into which cars can be allocated. The lower the rating, the cheaper that car is to insure. These ratings are based on the following:

  • Original sale price
  • Performance
  • Security level
  • Price of parts
  • Price of repair work

Choosing to drive a smaller car with a lower rating is likely to also lower your premiums, although remember that the other factors such as your age, location, driving experience and the use and average annual mileage will also be reviewed before calculating your premium.

Frequently asked questions

*Based on data provided by Consumer Intelligence Ltd, (June ’22). 51% of car insurance customers could save £330.51
The offers compared on this page are chosen from a range of products we can track; we don't cover every product on the market...yet. Unless we've indicated otherwise, products are shown in no particular order or ranking. The terms "best", "top", "cheap" (and variations), aren't product ratings, although we always explain what's great about a product when we highlight it; this is subject to our terms of use. When making a big financial decision, it's wise to consider getting independent financial advice, and always consider your own financial circumstances when comparing products so you get what's right for you.

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