Guide to Car Insurance


With premiums on a seemingly unstoppable rise, it's never been more important to know how to save money on car insurance.

However, price may not be the only factor. If it comes to a claim, you'll be far happier if you make sure your cover is adequate from the start. Not all insurers are equal!

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First we'll look at the basics, then we'll cover some important money-saving pointers.

The three main types of car insurance

Car insurance, for personal use*, comes in three main levels of cover:

1. Third-party only  is the minimum cover required by law. It covers you for any damage caused to other people or property.

2. Third party, Fire and Theft(TPFT) cover adds protection in case your car is stolen or set alight.

3. Comprehensive cover is designed to protect you from the full financial consequences of most accidents, and often provides additional benefits such as legal expenses cover.

You'd think that comprehensive would be the most expensive, but that's not necessarily so - see our premium-saving tips below.

* Any business use needs to be covered in its own right, although some insurers offer it as part of comprehensive cover: do check.

What should be included in car insurance?

If you're insuring for third party only, that's self explanatory.

If you also have fire and theft cover, there will be what insurers call anexcess. This means you have to cover the first few hundred pounds (or so) of each claim. This is to discourage frequent, smaller claims, which keeps costs down for everyone. Excesses are variable: more on this in money-saving tips below.

With comprehensive cover, there's a lot more to think about. Insurers vary, and they might give you some choice.

For example: courtesy cars

  • some provide an automatic courtesy car if yours is damaged
  • some provide this only if it's a no-fault accident
  • some have a seven-day limit, others unlimited
  • some leave you to rent a replacement car and include the cost if your claim is approved

Repairs: ideally your insurer will have a network of approved repair centres that guarantee any repair work they do. This extends your peace of mind if your car is damaged.

Comprehensive cover can also include cover for all drivers (usually over 25), third-party cover for driving other cars (with owner's permission), and legal expenses cover (in case you need to pursue a claim against an uninsured driver).

Premiums: how much, and how fast are they rising?

The premium is the annual amount you pay to be covered for a certain level of risk.

Unfortunately for all of us, these amounts are shooting up.

So let's look atwhat you can do to pay less for your car cover…

Car insurance money saving tips

How to shop around, and some "tricks of the trade" to get a lower quote…

Going direct vs. comparing online

You can't escape the advertisements for insurance price comparison websites. The most important thing that these ads highlight is thatcomparing can reveal big differences in cost. What you're actually paying for is an individual insurer's attitude to risk. One might say you're £400 of risk, another £800, yet the cover is similar. That's why you should compare.

However: price comparison sites aren't the only source for the cheapest deals. Remember, those websites take commission too, so your quote isn't necessarily at rock bottom prices. This is wheregoing directcan help:

1. If you find a good deal through a website, call them directly anyway for a quote: you may get a better offer

2. Some insurers - e.g. Aviva - only sell direct. They don't allow their products onto price comparison sites at all, and need phoning (or clicking) individually to check.

3. If you own more than one car, some insurers such as Admiral offer policies to cover multiple cars that are rarely available on price comparison sites - and these policies often provide strong savings.

How you can save money on car insurance:

  • Choose your excess. You can opt for a lower one (≈£100) for more cover in the event of a claim, or a higher one (≈£500) to save on the premium. There may be a compulsory excess for younger or inexperienced drivers.
  • Comprehensive cover  might be cheaper than third party! Bear in mind pricing is all about attitude to risk. If lots of drivers in your postcode with third party cover are claiming for crashes, and comprehensive-cover drivers are more careful, you could pay less by opting for more cover. Crazy, but it sometimes works!
  • Named drivers usually cost more - but can sometimes cost you less! Try adding your wife, girlfriend, neighbour, father or sister to the policy: the overall premium may be reduced.
  • Skip the legal cover, if you don't want it. This does expose you to additional risk, but similar cover can be purchased separately for less.
  • Don't ask for installments. For some this might be the only way to pay, but the interest rates are typically over 20% per annum - it's better to pay up in one go. In a claim, you'd have to pay any outstanding premium before settlement anyway.
  • Loyalty discounts  can save you up to 10%. Ask your home insurer, travel or pet insurer to quote for your car too - mention your other policy and ask for money off.
  • No-claims discounts(NCDs) vary from company to company - some offer up to 50% if you've been claim free for 5 years. Ask your insurer if they will consider NCDs earned through company car use or being named driver on another policy.
  • Finally -negotiate! Insurance is not a tangible product; the pricing can go down if you are persuasive. If you have a cheaper quote from a rival insurer, ask whether they can beat it.

Final note: don't get caught out…

It's interesting to see what happens to your car insurance prices when you follow our tips above, but it's most important that you don't tell your insurers anything untrue, or miss out any details. Insurers consider this fraud, they do compare notes from company to company, and if you forget something important (e.g. the accident you were involved in in 2009) you'll be left with no cover at all once they find out!

Read more Insurance guides >>>

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