Selecting Car Insurance When Buying A New Car
An internet forum post brought up the question of how car insurance quotes can vary so dramatically when buying a new car. It just doesn’t seem right.
“What really makes me angry,” says the poster, “Is that I can be quoted such a wide range of prices for essentially the same product (minor differences in excess and customer service, I guess). This would never occur on something like the price of milk, but it does with insurance, why?”
Most posters agree that the reason car insurance prices vary so much is because most people don't have the time or inclination to shop around for the lowest price. “And it's all because,” says DriveMeCrazy, “the consumer has no comparative data.”
Actually, he does: on internet comparative web sites you can compare online car insurance quotes from different companies. You need to do your homework and that means shopping around. (If you didn’t care, you wouldn’t be reading this.) Take a look at the results you may receive when you do a comparative insurance request for a quote (where the more +’s indicate the lower quote).
BloggsJ 30 20-something runabout with mags locked behind gate urban Premium +++ Insurer A
BloggsJ 30 20-something runabout with mags locked behind gate urban Premium ++ Insurer B
BloggsJ 30 20-something runabout with mags locked behind gate urban Premium + Insurer C
Seem simple? Add another factor: excess. The picture may change.
Insurer A Premium +++ Excess +
Insurer B Premium ++ Excess +++
Insurer C Premium + Excess ++
Superficially, Insurer C is the most expensive and B the cheapest. But, does this mean B is the most cost-effective?
Not necessarily.
Insurer C is the most cost-effective if you don’t mind paying through the nose for excess when you do have an accident. This is a good option for someone who drives a middle of the range vehicle car but wants to ensure that if an accident happens and the car is badly damaged, he can have it repaired with his excess paid for by the saving in premiums over the years.
Do you drive a top-of-the-range German vehicle with loads of extras? I would consider paying a medium-range premium combined with a high excess; insurer B.
If you drive a Silver Cloud, you’ll have to go with insurer D, who charges high premiums and high excess. But, like Clairol, it’s worth it.
Remember, a higher excess brings down your premium. Always make sure the value of your car is reduced when you renew your insurance.
Now let’s take a quick look at what you’re buying for your bucks.
There are basically three types of car insurance:
Comprehensive cover insures your car against accidental damage, fire, theft and hijacking as well as 3rd party claims.
Limited cover (also known as 3rd Party, fire and theft) is comprehensive cover without coverage of any damage to your own vehicle if you’re the cause of the accident.
3rd Party (which should be non-negotiable) covers injury to other people and damage to their property.
If you are buying a new vehicle you may want to select additional optional cover:
Insurance of sound equipment and accessories (your long-term hearing is not covered).
Provision of a courtesy vehicle if yours is off the road for some time.
Cover for business use of your car in other countries.
Extended cover which pays for the difference between what your comprehensive insurance pays out and what you owe to a finance company on the car.
Credit life cover which pays any debt you have on the car if you die or suffer from a disability that renders you unable to continue with payments.
Mechanical breakdown warranty offers additional cover after the initial warranties and guarantees expire (amazing, isn’t it, how you can almost calculate to the day when a product will break down – shortly after the guarantee expires).
Talking about insurance reminds me of a joke: If those black boxes on planes are supposed to be indestructible, why don’t they make the whole plane out of the same material? The answer: the insurance companies would be out of business.
