Masterherald News

By Krystal Steinmetz

Meet “Sally” and “Suzy”: These 30-year-old twin sisters are identical in nearly every way. Both women live in Louisville, Kentucky. They’re both employed full time, have stellar driving records, decent credit ratings and no lapses in car insurance coverage. They even drive twin 2005 Honda Civics – same color, make, model and mileage.

Sally pays $2,408 a year for car insurance – to get a policy providing theminimum coverage required by Kentucky – through Farmers Insurance. Meanwhile, Suzy pays Farmers $1,640 for the exact same coverage. So why is Sally paying 47 percent more than Suzy for the same insurance?

According to the Consumer Federation of America, Sally is forced to pony up more cash for insurance because she’s arenter and Suzy is a homeowner.

From our Solutions Center: How to quickly shop insurance

That’s right. The CFA – which recently conducted an analysis of premium quotes from the major auto insurers for a 30-year-old safe driver in 10 cities across the United States – found that consumers pay an average of 7 percent more (about $112 a year) for auto insurance if they write a rent check rather than a mortgage check for their home.

Depending on the insurer and where drivers live, they could be like Sally — paying upwards of 47 percent more for insurance. For example, Allstate’s auto insurance quote for a renter in Tampa, Florida, was 19 percent more than a homeowner. In Baltimore, Liberty Mutual charged renters 23 percent more.

The CFA maintains that auto insurance companies’ use of homeownership status in pricing leaves low- and moderate-income Americans at an unfair disadvantage. According to Federal Reserve Board data, the median income of renters in the United States was $27,800 in 2013, compared with $63,400 for homeowners.

“To raise people’s auto insurance premium because they can’t afford to buy their homes unfairly discriminates against lower-income drivers,” said CFA Insurance Director J. Robert Hunter in a prepared statement. “A good driver is a good driver whether she rents or owns her home. Insurance companies should not be allowed to target people based on homeownership status.”

The CFA obtained quotes from State Farm, Geico, Allstate, Progressive, Farmers, Liberty Mutual and Nationwide. Geico was the only insurer whose quotes were the same, regardless of the driver’s homeownership status.

“Virtually every state requires drivers to buy insurance, but we shouldn’t force them to buy a home in order to get the best price,” Hunter said. “State insurance commissioners and elected representatives should step in and stop this practice,” he added.

All drivers are legally required to have car insurance, but many people resent what can be a hefty annual expense. The good news, however, is that you can keep costs to a minimum by avoiding some of the most common motor cover traps

Trap 1: Thinking that loyalty pays

Many drivers assume that, if they stick with the same insurer year after year, they’ll be rewarded for their loyalty with lower premiums. On the contrary. Insurers thrive on our apathy and can bump up premiums each year, even when no claim has been made.

The best quotes are usually given to new customers, so the chances are you’ll be offered a more competitive deal if you shop around for cover every year. And even if your existing insurer offers you a lower price than last year, you could probably still save by comparing what else is on offer. So the message is simple: DON’T AUTO-RENEW YOUR CAR INSURANCE!

Trap 2: Buying third party, fire & theft to save money

You might think that, if you buy the minimum level of cover, the premiums will be much lower. But that’s not the case – often you can get comprehensive cover for a similar or even lower price than third party fire & theft cover. And comprehensive car insurance will provide you with much greater protection. Again, shop around.

Trap 3: Paying by monthly instalments

Although paying for your insurance cover upfront can seem more painful financially, it is actually much more cost-effective than spreading the cost by with monthly payments. Insurers usually add steep interest charges to instalments which can dramatically increase the overall cost, so if you can afford to pay the full premium at the outset, you should do so.

One option is to pay your premium in one go using a 0% purchase credit card, where you don’t pay any interest on your spending for up to 18 months. You should aim to clear the debt within 12 months though, so you’re only paying one insurance bill at any one time. It will also mean you avoid a hefty interest rate on the card balance whenever the interest-free period comes to an end.

Trap 4: Assuming all policies are the same

They’re not! Always read the small-print of your car insurance policy as cover can vary widely. Make sure the policy you choose suits your requirements. For example, does yours offer a courtesy car in the event your car needs repairs or is stolen? If not, and you don’t have another vehicle or sources of transport available, you could find yourself stuck. Same applies to breakdown cover.

Trap 5: Ignoring the excess

If a particular motor insurance policy seems unbelievably cheap, always check the excess, which is the portion of any insurance claim you must pay yourself. A very high excess can mean much lower premiums, but also that you might struggle to afford to make a claim at all, which defeats the point of having insurance in the first place.

The excess has two parts – the mandatory and the voluntary elements. The former is set by the insurer, you control the latter.

Trap 6: Overlooking telematics

Younger motorists generally have to pay higher car insurance costs than older drivers, but they may be able to reduce the cost of cover with a telematics policy. Here, ‘black box’ technology monitors the driver’s behaviour and habits and rewards safe and responsible driving with cheaper premiums. But be warned, if you aren’t confident your driving skills are up to scratch, then you’re unlikely to see a reduction in costs. And many telematics policies impose limits of 5,000 or 6,000 miles per annum, rendering them impractical for many drivers.

Trap 7: Not insuring your car because you never drive it

It is a legal offence to keep a vehicle without insurance unless you have notified DVLA that your vehicle is being kept off the road by means of a Statutory Off Road Notice (SORN). You don’t have to be driving to be caught. Even if it never leaves the garage, you either need insurance or you need to file a SORN.

Penalties for transgressing this law include a fixed penalty of £100, your vehicle being clamped, seized and disposed of, and a court prosecution with a maximum fine of £1,000.

Trap 8: Trying to save money by putting a parent as the main driver

Falsely declaring another person is the main driver of the vehicle when they aren’t is illegal. It is known as ‘fronting’ and can not only invalidate your insurance but can lead to a fine and penalty points on your licence, so it should be avoided at all costs. However, you can add a more experienced person as a named driver on your policy to help reduce premiums.

This tactic works for pretty much any driver because the insurer assumes the risk of an accident or theft will be reduced if more than one driver has access to the vehicle.

Trap 9: Making unafforable modifications

Tempting as it may be to fit alloy wheels or the latest stereo system in your car, making modifications can have a major impact on your insurance premiums – simply because the vehicle is no longer its original spec. Speak to your insurer if you are planning on making any changes to find out whether it will bump up the cost of cover.

Trap 10: Assuming all policies cover European driving

Millions of people take their cars abroad each year, but not all insurers include European cover in their policies, which could leave you high and dry if you have an accident while you’re abroad. Check the small print of your policy before leaving British shores and, if in doubt, check with your provider. If your policy doesn’t include European cover, you may be able to add it in return for an extra premium.

Finding yourself with an empty nest can be a shock to the system – once the children have left the house, there are many changes to take on board.

Watching the pennies

Most of us can only dream of running a top marque such as a Porsche, and economy will be a common priority. In fact, many will welcome the opportunity to ditch the hefty running costs associated with a people-carrier or estate in favour of a less fuel-thirsty vehicle.

The Hyundai i20 Hatchback puts fuel efficiency to the fore, squeezing 870 miles out of a tank of diesel in its Blue Drive iteration. And the car is yours for a relatively modest £8,700, or thereabouts.

When it comes to insurance, our couple in their fifties, living in London, would pay around £235 for insurance if they agreed to a £350 excess.

Giving green a go

When you’re nurturing your family, your motoring priorities tend to be having enough room for, first of all, car seats and buggies, and then a few years down the line for the lanky teenagers the babies grow into. Anxieties about environmentally-friendly motoring can often take a back seat (as it were), regardless of our best intentions.

But once the family has flown the nest, you can bring green concerns further up the agenda. If you’re not ready to take the plunge with a fully-electric car, an attractive stepping stone could by the Toyota Yaris Hybrid, which combines an electric motor with a conventional petrol engine.

At £15,495, the Yaris Hybrid is not cheap – it’s essentially just a snazzy hatchback, after all. But it’s exempt from road duty thanks to its CO2 emissions of 79g/km, and you should get around 80 miles per gallon.

Insuring a 3-door version, our couple in their living in a rural location in North Wales would pay a few pounds over £300 with a £310 excess.

Finessing a 4×4

Empty-nesting does not necessarily mean retrenchment to a modest runabout. If your taste favours a hefty 4×4, there are loads of cars out there to suit a broad range of budget and performance preferences.

The Subaru New Forester 2.0DX might be worth investigating if you’ve got £25,000 to play with. It’s not a monster along the lines of offerings from BMW, Porsche or Range Rover, but it’s powerful and easy on the eye. It’ll certainly do the job if you want to sling your golf clubs in the back or take the dogs for an outing in the country.

As far as insurance is concerned, a couple in their fifties with an Edinburgh postcode would pay in the region of £350 with a £300 excess.

Towing a caravan

According to the Caravan Club, people in their fifties are the UK’s most enthusiastic caravanners – the average age of its members is 55.

Just as important as the caravan itself is the car that will be pulling it, and you might consider an estate to give you the necessary horsepower. The Volkswagen Passat Estate Alltrack is a possibility – it goes beyond mere estate territory towards the muscle and ruggedness of a fully-fledged SUV.

With a towing capacity of 2000kg you should be fine to tow your van, and it’s comforting to know you can still expect impressive fuel economy of around 50mpg.

You’ll need deep pockets for this vehicle, though, with a forecourt price a shade under £30,000. But as a car with a relatively safe risk profile, the insurance should be reasonable. For our couple in their fifties, this time living out-of-town in Cambridgeshire, we found premiums under £200 – although the excess is quite steep at £400. A lower excess would nudge up your annual cost.

If your children have reached the age when they’ve started driving, you’ll know only too well how expensive car insurance for young motorists can be. And, as a parent, your instinct will be to do what you can to help.

Car and home insurance premiums are at a four-year low, according to new MoneySuperMarket research, which means your next renewal could be cheaper than last time

According to 49 million quotes run on MoneySuperMarket between April 2010 and March this year, the average car insurance premium is now £390. When prices peaked in the second quarter of 2011, the average premium was £545, which means there’s been a huge drop of 28%.

Home insurance premiums also sit at a four-year low, averaging at £126 – their lowest since MoneySuperMarket’s analysis began in 2010.

Here’s a look at why prices are falling, and why it’s just as important as it’s ever been to make sure you’re getting the absolute best price on your cover.

Maximise your savings

Clare Francis, editor-in-chief at MoneySuperMarket, said: “It’s the first time since we began monitoring market pricing in 2010 that we’ve seen both car and home insurance premiums fall this steeply across the country. This is great news for households struggling with the high cost of living and could help ease some of the pressure on the purse strings.

“Competition among providers is continuing to drive down the cost of car and home insurance policies and it’s important that consumers take advantage of this. Sticking with your existing insurer is unlikely to net you the best deal.

“Even though your renewal quote might be cheaper than the price you paid last year, chances are you will be able to save even more by switching to a different insurer so it is really important to shop around if you want to maximise the savings available to you.

“Finding the best deal on car and home insurance is quick and easy to do, and consumers stand to pocket up to £220 and £70 respectively* using MoneySuperMarket.”

North of the border

Our analysis has revealed stark regional differences for motorists.

For example, drivers in Carlisle have seen the most benefit, compared to this time last year, as their premiums have fallen by 15%. Motorists in Truro and Galashiels were almost equally fortunate, as their average premiums fell by 14%, year on year.

Car insurance buyers in Perth and Galashiels have the cheapest premiums overall, with annual cover typically costing £231 and £232 respectively.

In fact, Scotland fared well overall, as six of the top 10 cheapest locations for cover are north of the English border.

Cheaper home cover

The entire country benefitted from cheaper home insurance premiums, as costs fell across all 121 postal regions over the past 12 months – according to analysis of more than 11.8 million home insurance quotes run between March 2010 and February this year.

Home insurance premiums fell by 21%, nationally, while Bolton recorded the steepest drop in average premiums, falling by 19% (£26) over 12 months. Hull and Crewe also did well, benefitting to price drops of 14%.

The average cost of combined buildings and contents cover fell by 19% between 2011 and February this year to £142.

Don’t be wooed

As Clare Francis explains, just because your car or home renewal quotes might be lower this year than last year – it doesn’t mean they’ll be the absolute cheapest prices available to you.

Don’t be wooed by slightly lower prices from your current insurer – instead, take 10 minutes to compare prices using our car insurance and home insurance comparison services, and cut your insurance bills even furthe

Pressure from consumer groups and the financial regulator has prompted the Association of British of Insurers (ABI) to commit to making car and home insurance renewal notices clearer and more consistent.