Five Steps To Cheaper Car Insurance

As the summer driving season gets under way, we look at five ways to prune your car-insurance premiums.

This article was first sent to Fools as part of our Summer Lolly email series.

For the fourth year in a row, my family and I have opted for a `staycation' instead of a vacation.

In other words, instead of going abroad, we're holidaying in the UK again. And one thing that struck me this week was just how expensive motoring has become. On long journeys on clear roads, my wife's diesel car does around ten miles to the litre (roughly 45 miles to the gallon). According to PetrolPrices.com, the cheapest diesel in my area cost 126.9p per litre. Therefore, our 500-mile round trip to Cornwall will cost almost £65 in fuel costs alone!

So, with the weak British economy putting the squeeze on household budgets, here are five timely tips on cutting the cost of your car insurance:

1.    Pay a voluntary excess

When you make a claim on an insurance policy, an insurer requires you to make a contribution towards its costs, known as a policy excess. For car insurance, experienced drivers can expect to pay the first £50 to £100 of a claim. Younger drivers pay much more, say, up to £500.

Did you know that by volunteering to pay a higher excess, you can prune your premium by a tenth (10%) or more? Simply agree to a higher excess than the minimum and you should be able to make a saving on your policy each and every year.

2.    Add an additional driver

Here's an odd thing: adding another named driver to your policy can make it cheaper, rather than more expensive. For example, my wife is a very experienced and careful driver, with only one trivial accident in 23 years at the wheel. However, by adding me (a less experienced motorist) to her policy, her premium came down by about £20 a year!

3.    Keep your car safe

By taking steps to safeguard and secure your car, you can reduce the risk of accidental damage and theft. So, if you have a driveway, then park your car on it. Likewise, by leaving your car in a garage, you can expect to receive a discount of around a twentieth (5%) off your premium.

4.    Don't pay monthly premiums

If you can afford it, it is far better to pay your car-insurance premium as a single, lump-sum payment. This is because most insurers charge interest of up to 30% APR for allowing you to pay monthly premiums. That's twice as much as a typical credit card would charge and six times as much as the current Bank of England base rate! So you are far better off paying it all upfront on an annual basis.

If you do want to pay your premium in instalments, then you can get up to twelve months of interest-free credit by paying for your insurance using a 0% on new purchases credit card.

5.    Shop around

My most important tip is never renew an existing policy without price-checking it first. According to the AA, shopping around for a value-for-money policy can reduce your premium by around a third (33%). From my experience, it's a good idea to approach your existing insurer as a new customer, as this often leads to a premium lower than its renewal quote. So, compare car insurance premiums online to find a better quote, and then give your existing insurer an opportunity to beat it and thus keep your business.

Here's wishing you an accident-free summer of comfortable cruising!

Top Car Insurance Tips

1.    If fully comprehensive insurance is too pricey, then consider stepping down to third party, fire and theft (TPTF) or third party-only cover. Budget cover is better than no cover at all.

2.    The best way to keep your insurance premiums down is to drive carefully. So, apply a light touch to your accelerator and brake pedals!

3.    In addition, it makes sense to shop around for breakdown and recovery cover. Auto Aid charges just £36 for its Best Buy annual policy.