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IPT hike: how to keep car insurance costs down

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28/10/2015
The increase in Insurance Premium Tax (IPT), coming into effect on 1 November, could see the price of your motor insurance soar. Here are some top tips to keep costs down:

The standard rate of Insurance Premium Tax (IPT) will go up from 6% to 9.5% from 1 November. Although IPT is levied on insurance companies, the worry is the tax rise will be passed onto consumers through higher premiums.

Insurance experts predict motorists over 25 could end up paying £15 more a year for their cover. But it is young drivers who could be hit hardest, seeing their bill increase by £40.

The good news is there are a number of ways you can keep you car insurance costs down. Here are some suggestions:

Shop Around

It should go without saying, but it does bear repeating that before taking out a car insurance policy you should always shop around, comparing providers and quotes. Ensure, however, that you are comparing ‘like for like’ policies, that offer equivalent levels of cover.

No Frills

Most insurers offer policies that come with bells and whistles, such as replacement cars for when your vehicle is being repaired, ‘free’ high-tech alarm systems, etc. However, while these add-ons can appear attractive, they may be unnecessary – and will always result in a high premium. When deciding your policy, think about the features you really need, and ensure you don’t pay over the odds for things you don’t need.

Choose your car with care

The car you drive will directly impact the size of your insurance premium. Car insurers divide vehicles into 50 separate insurance groups; constituents are decided according to a number of different elements (such as engine size, average repair cost, etc.). Before buying a new car, it is highly advisable to check its grouping.

Car review website Parkers.co.uk has created a handy online guide, allowing you to find a car’s insurance group directly, and view all cars in each insurance group. You can visit the site by clicking here.

Usage

By definition, if you use your car infrequently, you are statistically less likely to be involved in an accident.

Some insurers offer policies with agreed mileage limits, with resulting smaller premiums. However, if an agreed mileage is exceeded, it can invalidate the policy. Direct Line publishes a mileage calculator on its website, allowing you to calculate how many miles you drive annually.  Check it out by clicking here.

Pay As You Go

‘Pay As You Go’ car insurance is a recent innovation which, as the name suggests, allows motorists to pay only for insurance when they’re driving their car. If you rarely drive, don’t take extended trips using your car or rarely drive in rush hour, this could be a sensible alternative to a standard insurance policy – and is certainly cheaper than a ‘24/7’ premium.

Insurance welcomes careful drivers

Points added to your license means pounds added to your premium. If a traffic offence is particularly severe, finding an insurer who will offer you cover can be extremely difficult – and will be very expensive indeed.

Escalate excess

An excess is the amount a policy holder is required to pay towards a claim. A standard compulsory excess is £150 – but if you consent to a higher excess voluntarily, you’ll receive a lower premium in return. You should be realistic, of course, about just how much you’ll be able to afford in the event you make a claim.

No Claims

Drivers who don’t make claims are rewarded; extended periods without claims also entitle drivers to no claims discounts. The longer you go without claiming, the higher the discount – drivers who go five years without making a claim can see their premiums halved. If an accident is minor, it can make financial sense to pay for repairs out of your own pocket, rather than claiming.

For more information on the factors that affect the cost of your car insurance, see the YourMoney.com guide ‘How your postcode and your car insurance premiums are linked‘.

Consider telematics

Telematic insurance policies are a relatively recent innovation in the insurance sphere. A black box is fitted to a vehicle to record the driver’s performance. Motorists pay premiums according to how well they drive – or, pay an upfront premium, and are offered rebates proportionate to their record.
For more information on telematics, click here.

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