Sneaky car insurance myths and rip-offs

Make sure you're aware of these car insurance myths, and watch out for the rip-offs!

No one likes to pay too much for their car insurance. But unfortunately, if you own and drive a car, car insurance is one of life’s expensive necessities. And at times, it can really feel like you’re being ripped off.

Car insurance can also be a tad confusing and if you don’t read the terms and conditions of your policy carefully and you later have to make a claim, you may find that something you thought was included in your policy isn’t.

So here, I’m going to reveal some of the top car insurance rip-offs and myths to be aware of.

Let’s start off with the rip-offs.

Rising administration fees

According to recent research by Defaqto, more and more car insurance companies are charging administration fees for features that in many cases were previously standard services. In some instances, you may not even be aware that you’re being charged.

What’s more, these fees are getting higher. Typically, these fees are for the initial setup of the policy, any adjustments to your policy, duplicate documents, cancellations and renewals.

The table below shows the average policy and administration fees charged by those car insurance policies that charge fees:

	2004	2005	2006	2007	2008	2009	2010
Setup fee	£12.32	£20.00	£15.62	£15.25	£13.25	£17.28	£21.77
Adjustment fee	£14.42	£15.45	£16.03	£16.81	£17.66	£18.23	£18.84
Duplicate documents fee	£12.95	£15.48	£15.91	£17.16	£18.02	£18.70	£17.49
Cancellation fee	£35.61	£31.71	£33.88	£32.77	£34.14	£36.78	£37.44
Renewal fee	£12.32	£20.00	£17.50	£15.63	£11.30	£17.69	£17.65

Source: Defaqto

Personally, I think these charges are a rip-off. Although insurers may need to find ways to boost their revenue stream, these fees seem unfairly high.

After all, having to cough up around £22 to simply set up your policy seems crazy to me. And if you need to make a small adjustment to your insurance policy – perhaps you’ve got married and you need to alter the name on the policy, for example – you’ll have to fork out around £19 for the privilege.

So when you’re choosing which car insurance policy to go for, make sure you read the terms and conditions carefully to avoid getting stung by these fees unexpectedly.

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Female-only insurance policies

This isn’t strictly a rip-off but it’s something to be aware of.

Many female-only car insurers claim their products are competitively priced because statistically, women cause fewer accidents and make fewer claims. However, this doesn’t guarantee that they will offer the very best deals on the market.

As I proved in The best car insurance deals for women, in many cases, simply doing your own research and shopping around will result in finding an even cheaper premium than that offered by female-friendly insurers.

Of course, this won’t always be the case, but it does show that shopping around is important.

Renewal quotes

Whenever your car insurance policy is coming up for renewal, you’re bound to receive a renewal quote from your provider. However, if you simply accept this quote without checking it's the most competitive, there’s a good chance you won’t be getting the best deal and you're likely to be getting ripped off instead.

In fact, if you were to apply to your current provider as a new customer, you'd probably find the quote you'd receive would be cheaper than your renewal!

So don’t get caught out by this rip-off and shop around carefully whenever your car insurance is coming up for renewal. It might seem like a hassle but it will be well worth it.

Monthly payments

Watch out if you’re spreading out your car insurance payments by paying monthly. By doing this, you’ll end up forking out around 10% to 20% more than if you simply paid up in one go. Ouch.

If you can’t afford to pay the full amount upfront, it’s a good idea to pay with a 0% on new purchases credit card, such as the Tesco Clubcard Credit Card. This card offers 13 months interest-free on all purchases, so you’ll have over a year to clear your balance without worrying about paying interest. Just make sure you do clear your balance before the interest-free period comes to an end, otherwise you’ll be hit with an interest rate of 16.9%.

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Exclusions

Some car insurance policies will exclude certain features from your policy.

For example, Defaqto found that half of car insurance policies won’t include a courtesy car as standard if your car is written off or stolen. And more than half of policies won’t cover you for replacing your car locks if your keys are lost, while a quarter won’t cover you for replacing locks if your keys are stolen.

So again, it all boils down to checking the terms and conditions of your policy carefully to ensure you’re not caught out.

So that's the rip-offs done. Now let's take a look at some myths:

Driving other cars

Myth: Driving other cars cover (DOC) means you can drive anyone else’s car and you’ll be fully insured.

Fact: Most fully comprehensive car insurance policies include cover to drive other cars, providing the policyholder has the owner’s permission.

However, you should bear in mind that your cover will be third party only. This means that if you were to drive the car and crash it, the insurance would only cover the cost of the damage to the other vehicle – not the car you were driving. As a result, you could end up coughing up a substantial sum of money.

Your car’s value

Myth: Your vehicle is worth what you paid for it if it is ‘written off’.

Fact: If your car is stolen or damaged beyond repair, the insurer will only pay you what it costs to replace it with a similar model today, and not what you paid for it originally, as most cars lose value over time.

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Driving abroad

Myth: If you have fully comprehensive cover, this means you automatically have fully comprehensive cover when you drive abroad.

Fact: If you want to have fully comprehensive cover when you’re driving abroad, you need to phone and tell your insurer. Foreign use cover charges will usually apply because the cost of repair, recovery and repatriation is much higher.

Injuries

Myth: If I get hurt while driving I can claim for my injuries.

Fact: This is only the case if the accident is someone else’s fault. However, if you have driven your car into a ditch, you’ll only be able to claim for any damage to the car – not yourself.

So next time you’re applying for car insurance, make sure you’re aware of these myths and watch out for the rip-offs!

*Thanks to esure for these myths.

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