by Stuart Coster
The typical advice when buying car insurance is to 'shop around' for the lowest quote. But failing to think ahead and factor in potential extra costs during the period of the policy could leave that cheap quote looking far from the best deal.
Motorists are being urged to be alert to a growing range of extra charges that could make car insurance policies far from the best deal months after drivers have bought them.
Analysts are predicting big rises in car insurance premiums this year due to a combination of an EU ruling on VAT, spiralling personal injury claims and accidents involving uninsured drivers.
In a bid to boost profits while keeping quotes competitive, insurers are cutting back on previously standard features of policies and cashing in on a range of post-purchase charges.
Moving house, changing your car or wanting to take a car abroad on holiday are often predictable events within the period of a car insurance policy. But few factor in the extra costs of such events at the time of buying.
As these charges vary widely between insurers, adding them to the headline quote can turn the cheapest policy into one that's not so competitive.
Policy amendment charges
Some insurers will charge up to £25 to make a change to the details on which a policy is based, on top of any additional premium that may be due for a new car or address.
The AA charges this top rate, while Churchill isn't much better, charging £21. However, Norwich Union stands out for making no admin charge for policy changes.
With 7.5 million used cars changing hands in 2005 and one in ten people moving home every year, charges for policy changes alone net insurers a substantial extra income.
Extra for driving in Europe cover
The number of free days of full cover for taking your car to the continent included in policies also varies widely between insurers.
Some, like Churchill and Elephant.co.uk, include a generous 90 days full cover free of charge. However, Admiral and easyMoney offer no free days at all, hitting customers with a further charge for anything more than basic Third Party cover if wanting to take their cars on holiday.
While others, like eSure and Direct Line, offer three days free - enough for a weekend away - taking a car on a two week break to Europe could cost their customers up to £50 extra.
Up to 4.5 million people will have faced these extra charges for taking their car abroad during 2005.
High cost of paying monthly
Insurers have also been criticised for hitting customers with high interest rates for paying monthly. The AA fares badly here again, charging customers an APR of 24.9% which is very high when compared with interest rates of competitive credit cards at typically around 15%. Kwik Fit is another poor performer, charging customers an APR of 16% for paying in installments.
While some insurers do have competitive APRs for paying monthly, in almost all cases it still makes more sense to pay for car insurance in one go on a special offer 0% interest credit card.
Paying the total off the card monthly, rather than arranging installments through the insurer, can save this big extra cost.
Courtesy car - standard or extra?
It also pays to study policy features such as whether a courtesy car is included free with a policy, and the size of the compulsory excess, to compare what your extra costs would be if the worst should happen.
A free courtesy car is becoming more rare as a standard feature, with insurers instead offering to 'guarantee' a courtesy car only in return for an additional fee when buying the policy.
If drivers exercise their right to choose a repairer that isn't approved by their insurer but which will provide a free courtesy car, insurers often charge a higher excess.
Excessive excess?
Costs like the compulsory excess that motorists are expected to pay towards a claim can vary by at least £140 between different insurers, even given the same personal circumstances.
Choosing an insurer with a high compulsory excess leaves little room to offer to pay an additional voluntary excess to help reduce the quote, without potentially being hit with a large bill in the event of an accident.
Most of us will have a good idea whether we're likely to move house, change cars, or take a car to Europe on holiday in the year ahead.
Considering likely extra charges when buying and factoring them into the quote will ensure the true annual cost of policies can be compared.
