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Is the cheapest car insurance really the best bargain? Could buying the lowest cost policy be a good deal - or an expensive mistake?

Do cheap policies include any extras?

Every comprehensive policy is different. Although they all cover you for third party risks (they will pay for damage to other people's property, or injuries to others) what other benefits they offer you will vary from one insurer to the other. For instance, will that cheap policy cover the following?

  • Misfueling: what if you accidentally put petrol into a diesel engined car, or vice versa?
  • Theft of personal belongings: what happens if luggage is stolen from the boot, or a handbag from off a seat?
  • Hotel expenses: if you have an accident miles from home, will they pay for accommodation?
  • Legal costs: if you have an accident and the other party takes you to court, will they cover your costs?
  • Accessories cover: What happens if someone breaks into your car and steals the stereo, or GPS system?
  • Courtesy car: is this actually guaranteed, or just if available? How long for, and what standard of car can you expect?
  • Windscreen repair: is it covered, and what excess will you have to pay? Will it affect your no claims bonus?
  • Overseas travel: are you covered for it, and for how long?
  • Extra named drivers: can you add them, and how much extra is it?
  • Compulsory excess: how much will come out of your own pocket if you have an accident?
  • Vehicles not belonging to you: are these covered by your policy, are there limits, and just what cover is included?
  • Negligence: what if, for instance, your car is stolen because you left it unlocked?
  • Personal injury; will they pay if you are at fault? Are there limits or special conditions?
  • Accidents on private land: would you be covered for an accident in a car park, or driving on anything other than a public highway?

You may feel that you don't need any of these - but you never know and they could prove expensive.

Are all providers equally trustworthy?

Insurance Providers in Britain are strictly regulated but some are less easy to deal with than others. If you have an accident you can be very stressed so you want to know that your insurer, or broker, will:

  • Be easy to contact. Internet only insurance providers may not be as accessible as those that you can telephone
  • Deal with your claim quickly and courteously
  • Have a freephone or local cost only telephone number, not a premium line
  • Have a reputation for quibble free payouts, rather than hiding behind policy small print
  • Have reasonable charges if you need to change a policy or cancel it.

This is where review sites can be very useful. There is no point arguing about paying, say, ??100 to change your address on your documents if it is specified in the company's terms and conditions. Or finding out that they refuse to pay out because you changed your job without telling them. There are lots of car insurance review sites you can search on and they could help you avoid future problems.

Can car insurance be too cheap to be true?

There have been cases of bogus companies advertising on search engines and social media. Sometimes they have impersonated genuine companies. Often they prey on young or less experienced drivers who face heavy premiums from honest providers. You should be extremely careful if any of the following happen:

  • The quoted premium is extremely low.
  • They advertise a mobile phone number (a normal phone number is no guarantee that they are genuine either; these are easy to set up)
  • They want payment by any means other than credit card
  • They don't have a recognised website with clear contact information (although again these are easy to forge)
  • They cold call you by telephone or contact you via social media
  • They don't have an address where you can call to see them.

Remember, it's an old saying but still relevant: if an offer is too good to be true, it probably isn't. If you contact the company yourself via a reputable price comparison site it is likely to be genuine since they should all vet their providers before including them on their panels.

Is offering a high car insurance excess a wise move?

It may not be. The excess applies to damage to your own car in the event of an accident if it is judged to be your fault. The insurer should pay 100% of third party claims.

There are two parts to an excess; a compulsory one and a voluntary one. The compulsory one is to stop people making multiple claims for small sums, but some of these excesses can be very high, up to and sometimes more than ??1000. You may feel that a slightly dearer policy with a lower excess could make more sense for you. On the other hand, offering a high voluntary excess - which is on top of, not instead of, the compulsory one - may reduce your premium.

However If you make a claim then you will have to pay both the compulsory and voluntary excesses out of your own pocket before the insurer pays the rest. Bear in mind that if you have a cheap car the total of the two excesses may come to more than it's market value meaning that if it was written off you would get nothing back at all from your insurer.

You need to balance the premium reduction that a high excess will gain you against the possibility that you could lose your car with no payout from your insurer. Only you can decide that. Just make sure that you check what the total excess is before accepting what looks like a cheaper quote. You may have to pay it one day so that cheapest policy may prove to be more trouble than it's worth.

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