Car insurance for the short term!

Borrowing a mate's car for a day or two? Short-term car insurance could save you £££... and your friendship

Ah, the internet. It's brought bargain hunters so many useful things. Freecycle. Ebay. And of course, lovemoney.com.

But what you may not know is that one of the more recent benefits of the web is short-term car insurance.

This is a relatively new product, which gives you comprehensive car cover (not necessarily on your own car) for between one and 28 days. You can get cover instantly online, usually at a very reasonable price.

So perhaps a relative needs to use your car for a day or two. Or you want to drive a new car home, before shopping around for a full, annual insurance policy. Or you're borrowing a friend's van to move house.

In all of these situations, short-term car insurance is exactly what you need. Not only is it likely to be substantially cheaper than adding a new driver to an existing insurance policy. But it also means that if anything happens, the responsibility lies only with the person insured on the short-term policy - so it doesn't affect the no-claims bonus of the person who usually drives the vehicle.

Just a few years ago, it would have cost insurers so much to write a new policy that it wasn't worth offering standalone insurance just for a couple of days.

But now, the web has helped reduce transaction costs to the point where short-term insurance is generally available online - to the benefit of both insurers and drivers.

How does it work?

I used short-term car insurance last week to borrow a friend's Honda Civic for the day. It saved her the hassle and expense of adding me to her policy and then taking me off again almost straight away. Instead, I just bought insurance for myself online.

All I needed was her registration number, a credit card, and a printer, and within 10 minutes I was safely and legally covered to drive her car for the day.

The cost was £21 for 24 hours' comprehensive cover. Given that I'm a fairly new driver, and my own insurance on my tiny Citroen is well over £1,000 a year, that doesn't seem unreasonable.

As an experiment, we got a comparable quote from her own insurers to add me as an extra driver on her policy - indefinitely, since they couldn't add me temporarily. They said it would cost £100.

So we saved money on the day's driving. But even better, if anything had happened while I'd been driving, and I'd had to make a claim on the policy, it wouldn't have affected her no-claims bonus.

That could save her hundreds, if not thousands, of pounds over the years. And it put the responsibility to drive the car safely with me, where it belongs.

As it happened, the car was fine, and I drove it home with no incidents. But as well as saving cash, short-term car insurance definitely lessened the strain on our friendship that day.

How it happened

So how exactly has the internet made this possible? According to insurer Aviva, electronically traded policies have enabled insurers to sell short-term cover. In the past, setup costs associated with creating a new insurance contract were much higher. And as short-term policies aren't as valuable as annual policies, that made offering them too expensive.

Thanks to the internet, the transaction costs of writing a new policy have come down, so short-term policies can be offered at a reasonable price. And because you can now buy short-term insurance online, you can get instant cover 24 hours a day, 365 days a year.

That makes it particularly useful for times like the Christmas holidays, when friends and family may well want to share driving duties, and telephone-based insurers will be closed.

Watch out for...

Because short-term car insurance is basically an off-the-shelf product - not an individually tailored policy - insurers tend to slap heavy restrictions on who can buy it.

Often, this insurance isn't available to very young drivers, sometimes up to the age of 25 (sadly, not a problem for me).

You usually need to have had a full licence for a year, and too many penalty points will disqualify you. There's also likely to be an upper limit on the value of the car, typically £30-40,000.

Most importantly, these policies tend to come with a high basic excess, typically £500. However, you can pay to reduce this to around £250.

All of this adds up to one important point - like any insurance, read the small print before you buy.

And how to buy it

As always, it pays to shop around a bit when looking for your car insurance. However, short-term car insurance is still a relatively novel idea, so there aren't yet that many products on the market.

The table below shows some of the leading insurers who provide it, and some restrictions.

Finally...

Short-term car insurance may not be for everyone. Sometimes, you might be better off simply adding a driver to an existing policy - if they're likely to drive the car for longer than 28 days, for example. You also can't use short-term policies consecutively.

And if you have a policy of your own, you may already have third-party cover to drive other cars. So if comprehensive cover isn't an issue, short-term insurance may not be right for you.

But if you want full cover, quickly and cheaply, short-term car insurance truly is a great thing. The wonders of the web. Will they ever cease?

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