Watch out for this car insurance scam!

Don't be fooled into thinking increasing your excess will reduce your car insurance premium. It doesn't always work...

My car insurance policy is soon due for renewal and it always amazes me firstly, how quickly a year seems to pass, and secondly, how expensive car insurance is.

Fortunately, there are several ways to help keep the costs of your car insurance to a minimum. Unfortunately, one of the most popular ways to do this doesn’t always work – and in fact, it could see you paying out even more money!

Sneaky tricks

When looking for ways to reduce how much we pay for our car insurance, increasing the excess seems to be a logical option. The excess is the amount you shell out before your insurer pays out. So in theory, by agreeing to pay a higher voluntary excess (so you’re paying out more money from your own pocket), your insurer should be generous enough to reduce your premium.

Yet recent research from Which? has revealed that many companies are actually charging similar amounts no matter what size excess you’ve agreed to. So even though you’re agreeing to pay out more, your insurer is still charging you the same premium. And in those cases where the premium is lower, often the size of the reduction is so small, it’s not worth bothering with.

But to make things worse, in a few cases, the premium will actually be higher! Outrageous!

To give you some examples, according to research, increasing the total excess on car insurance from Aviva from £350 to £550 led to an 8% rise in the price of the policy!

Meanwhile, increasing the excess with the AA had no impact on the premium, and the cost of car insurance from Budget, Post Office and RAC only went down by 1% despite increasing the excess by £250 – saving consumers just £6!

Other assumptions

This little trick is certainly one to be aware of. However, expecting the premium to come down when we increase the excess isn’t the only assumption many of us make – as I’m about to reveal.

Sparkly adverts for female-friendly car insurance might make you think that insurers such as Sheilas’ Wheels and Diamond offer cheaper deals for women. However, as I revealed in The best car insurance deals for women, although they may have added benefits such as handbag cover and female-friendly repairs, these insurers don’t always offer the cheapest deal or the best. So you could end up paying out more money than you need to.

Similarly, multi-car insurance might sound like good value for money, but it doesn’t always guarantee that you’ll be getting the best price for your insurance. In fact, according to research by Swiftcover, a 30 year old male* insuring a Peugeot 206 and a Ford Fiesta could save £869.91 a year by taking out individual cover for the cars rather than multi-car cover.

You might also assume that when your car insurance is up for renewal and your insurer sends you a renewal quote that this will be competitive. After all, if you’ve been a loyal customer, you might expect to be rewarded for that.

However, in reality, there’s a good chance this renewal quote won’t be competitive and if you were to apply as a new customer, you’d probably find the quote you’d receive would be cheaper than your renewal!

You can find out more about other assumptions in Sneaky car insurance myths and rip-offs.

What you can do

Overall, this boils down to the importance of shopping around. Before you take out any car insurance policy – whether it’s your first policy or you’re renewing your current policy, whether you’re male or female, or whether you’re applying to cover one car or three - it’s important to do your research.

Fortunately, this is easy to do with the lovemoney.com car insurance comparison tool. Simply enter the required figures and take a look at the range of quotes that will appear.

It’s a good idea to play around with these figures too. Check to see whether increasing the excess is a help or hindrance. Will you be getting a better price for paying a little more? Or does it make no difference whatsoever?

If you’re considering a female-friendly insurer, are you sure the quote you’ve been given really offers the best deal?

Related how-to guide

Slash your insurance costs

If you’re feeling the pinch, these ways of saving money on your insurance will help.

See the guide

If you’re covering more than one car, does multi-car cover really work out to be cheaper than separate policies?

Finally, will your car insurer really give you a better deal if you renew with them? Or would another insurer save you even more money because you’re a new customer?

All of this is well worth investigating. Admittedly, it may take some time. But it is worth doing if you want to ensure you’re not paying out too much money.

For even more ways to ensure you’re getting a good deal, have a read of 10 tips to beat rising car insurance costs.

*Based on a married 30 year-old male IT consultant living in London E2 insuring a 2005 Peugeot 206 CC Alure and a 2005 Ford Fiesta LX, with a married 30 year-old female office worker as named driver on both cars and a £350 voluntary excess. Both drivers have more than five years no claims bonus and no recent motoring convictions. Both cars are insured to drive up to 20,000 miles per year. Quotes are based on multi-car cover from Admiral and individual cover from Swiftcover.

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