10 things you probably didn’t know about car insurance

A young woman driving a car with her friend in the passenger seat

October 13, 2020

Millions of drivers in the UK are not fully aware of all the terms and conditions of car insurance, and what with everything we need to sort out on a daily basis, is there any wonder that we don’t find the time to delve deeper into the subject?

In this guide, we help to inform, or indeed remind, car insurance policyholders about some important things they may not be aware of when it comes to their policy.

Failing to be aware of the ins and outs of car insurance could lead to a void (invalidated) policy or more expensive premiums unnecessarily, so it’s important to brush up on your knowledge to make sure you’re driving legally and not paying too much for cover.

1. Car insurance is a legal requirement in the UK

There’s no escaping the underlying fact that car insurance is a must if you’re looking to drive a vehicle on the road. Insuring your car isn’t something you opt in or out of, it’s a legal obligation on the part of the vehicle owner/main driver to ensure that they arrange the necessary cover and have it in place at all times.

As of June 2011 – and marking the advent of the Continuous Insurance Enforcement (CIE) law – failure to adhere to this law in the UK will result in fines, a driving ban or even criminal proceedings being brought against you; unless the owner of a vehicle has completed a Statutory Off Road Notification (SORN), which is an official document that refers to a specific vehicle that’s not in use. Instead, it is either sat on the drive or locked up in a garage (private land only) and is not being used on public roads or land - that includes parking).

If you don’t declare your vehicle as ‘off the road’ with a SORN, you could face fines of up to £1,000 or more for using or keeping a vehicle that doesn’t have tax or a SORN on public land.

It is vital that if you intend to use your vehicle again, you must have a valid insurance policy in place first.

Read more: Driving Without Insurance – The Penalties

The ushering in of this new rule back in 2011 was aimed at reducing the alarming problem of increased numbers of uninsured drivers on the road, yet the well-meaning crackdown could inadvertently trap innocent parties if they don’t stay on top of their insurance responsibilities.

2. It can be cheaper to pay upfront in one lump sum (annually)

If you’re in a financial position which allows you to pay up-front for your annual car insurance policy then it’s always advised that you bite the bullet and settle the premium in the one lump sum, rather than opting to pay monthly for cover.

Monthly payments, whilst convenient from the outset, will almost always incur interest on top, and ultimately, this will end up costing you more in the long-run.

This is primarily due to the fact that car insurance providers treat monthly payments as a form of credit (like a loan from then to you), much in the same way as personal loan companies and lenders operate. Incremental (yet mostly unseen) interest charges could total around as much as 30% over a 12-month period.

It’s also worth noting that if you fail to pay your monthly payments, this may have a negative impact on your credit score.

Read more: Does Your Credit Score Affect Car Insurance?

3. Your premium may change if you move address

A percentage of everyone’s car insurance premium is calculated based on where the driver lives; and therefore, the postcode at which the insured vehicle would spend the largest part of its time.

So if you should move home and change your address then the premium will need to be re-calculated to take into account any greater or lesser risk factors associated with the new postcode. And it’s not just relocation you need to keep your motor insurer in the loop about either, as equally important in the grand scheme of insurance things is a change in career, which could see the policyholder driving to a different location and travelling during different times of day/night than confirmed in the original car insurance policy document.

Neglecting to update your policy details such as these can compromise your current policy and risk invalidating it in its entirety. What’s more, a future claim could be refused on the grounds that the driver’s details had changed since the policy’s inception and refused claims must be declared when applying for policies in the future, which could increase your premiums as a result.

Read more: The Average Cost of Car Insurance UK | How is it Calculated?

4. Failing to tell your insurer about any car modifications is an offence

While the more obvious additions of a 5” diameter sports exhaust, a rear spoiler the size of a picnic table and a re-spray in lurid orange might be obvious reasons for informing your car insurer that not-so-subtle changes have been made to your vehicle since you first took out the motor insurance policy for it, less extreme modifications are equally important to mention if you wish to remain on the right side of the law, or at least not risk invalidating your existing policy.

Other car modifications you'll need to let your insurer know about include:

  • Changes to interior upholstery
  • Parking sensors fitted
  • Roof racks and tow-bars added
  • Non-original stickers, badges and murals

In short, if you don’t inform your insurer about any changes to the exterior, interior or engine, then you risk voiding your insurance policy and all those premiums you’ve paid will have gone to waste.

If you're in any doubt, simply contact your existing insurance provider and they'll be able to tell you whether or not your policy needs updating.

Read more: 7 Common Mistakes That Could Void Your Insurance

5. Fully comprehensive insurance isn’t the most expensive policy

Despite the assumption that fully comp policies will typically be the most expensive, in recent years, this is generally no longer the case.

Years ago, third-party-only (TPO) cover was the cheapest type of policy you could buy. However, insurers discovered that drivers (particularly younger and more inexperienced motorists) were purchasing this type of insurance just to save money - not because it provided them with sufficient cover.

They also found that people who took out a TPO policy were more likely to be involved in a road traffic accident and make a claim on their policy; so as a result, they increased the prices of third-party-only policies and made fully comprehensive cover cheaper to reward honest motorists who abide by the rules.

Read more: What does ‘third party’ and ‘comprehensive’ car insurance actually mean?

6. Loyalty to your provider counts for nothing

They say a change is as good as a rest, and certainly in motor insurance provider terms this adage definitely rings true. Switching providers rather than sticking with the same one year after year is widely encouraged if you wish to secure a more competitive car insurance premium when your policy is due for renewal, as rarely does it pay to retain a relationship with an existing provider.

On the contrary, new customers usually get offered the best and most attractive deals to entice them in, and loyal customers tend to see an increase in cover for no reason.

Learn more: Millions of Drivers Have Paid a Total of £1.9bn for Loyalty Tax

By switching car insurance providers, you could save a significant amount of money on your premiums, even as much as a few hundred pounds.

Is advised by MoneySavingExpert, Martin Lewis, that drivers should start comparing car insurance quotes around 3 to 4 weeks before their renewal date. If you find a cheaper quote for exactly the same level of cover (or more if you need it), then you will be better off switching to that provider. If you decide to do this, you will need to contact your existing insurer to let them know that you do not wish to auto-renew your policy.

Read more: Car Insurance Renewal - A Complete Guide

7. Opting for a high excess could end up being a false economy

Many drivers decide to increase their voluntary excess amount when purchasing cover in order to minimise their monthly premiums. However, it’s important to make sure that if you do this, you set it at an amount you could comfortably afford to pay in the event of a claim on your policy.

To help put this into a clearer perspective, it’s worth mulling over the following example: if, say, you plump for a £250 excess on your future car insurance policy, you may end up saving £50 over the course of a year. However, this has to then be conversely viewed as you being liable to stump up £200 more in total if you need to make a claim on your policy thereafter.

8. A Protected No Claims Discount (NCD) won’t stop your premium going up

With most insurers, a no claims discount (sometimes referred to as a no claims bonus - NCB) will increase over time, whether it’s protected or not.

When taking out cover, your insurer may ask if you want to protect your NCB so that in the event of a claim on your policy, your NCB wouldn’t be impacted.

Having no claims bonus protection won’t, however, protect your premiums from increasing on your next policy, as insurers will alter the cost based on how many claims you’ve made in the past, how many driving convictions you have and a range of other factors as well as your NCD.

If you need to make a claim on your policy, there’s a chance that you might lose some of the NCB that you’ve built up, depending on your insurer’s terms.

For example, say you have built up a 60% no-claims discount after five years of not making any claims and building it up, but then you need to make a claim for an accident after this, your NCD might drop down to a three-year discount at just 40%. It’s always worth checking this with your insurer if you’re not sure.

It's also worth noting that car insurance premiums will rise in-line with inflation regardless of NCDs.

9. Telematics 'black box' insurance policies will reduce premiums

Based almost exclusively on the insured party’s acknowledged driving behaviour, telematics insurance gives younger and inexperienced drivers the opportunity to be rewarded with cheaper premiums for driving sensibly.

A small black box device is fitted to the driver’s car which tracks:

  • How fast you drive (speed)
  • How you accelerate and brake (harshly, smoothly, etc.)
  • The time of day you drive the most
  • Whether or not you take breaks on long journeys
  • How much you drive on the motorway

Refunds are offered throughout the term to recompense the policyholder who will have paid the usual premium up-front, on the proviso that they demonstrate they’re safe drivers, whilst other insurers give a larger discount at renewal time by way of reward.

Although marketed as an insurance product for young and inexperienced drivers, telematics policies can be readily arranged by drivers of almost any age and are being proven to drive down the costs of premiums.

Learn more about telematics cover: Black Box Car Insurance: The Pros and Cons

10. Fronting is illegal

Fronting is the phrase coined for older drivers (mature and experienced motorists) who falsely present themselves as the main driver on car insurance documents so as to get a cheaper premium for a younger person (typically newly-qualified sons and daughters) who is listed as a named driver on the same policy.

This type of car insurance fraud isn’t always committed by older drivers; fronting refers to anyone who is listed as a named driver on a car insurance policy but uses the vehicle more than the main driver.

Fronting is an unlawful practice and can – in the event of an accident – render the vehicle uninsured (by validating your policy), which, in turn, would leave the policyholder legally responsible for meeting the costs of a claim themselves, for all parties concerned, while it is also likely to result in a fine, penalty points, a motoring conviction or worse.

Fronting would theoretically end up costing the policyholder much more than the overall cost of being honest and insuring the vehicle in the correct way in the first place.

To reiterate, although adding another driver is a frequent and legitimate manner in which to reduce motor insurance premiums, it’s illegal to falsely declare that you are the main driver of a vehicle when, in reality, it’s someone else who will be doing the bulk of the driving.

Read more: The Implications of Being a Named Driver

Switch providers and save on your next policy

As mentioned in point number 6 above, it doesn’t pay to stay with the same insurance company every year – instead, it is more cost-effective to do your research and compare quotes online (either with comparison sites or directly with insurers who aren’t on comparison sites) to see if you could get a better deal for the exact same level of cover (or more if you need it).

If your existing insurer can offer you a better deal than the ones you’ve found online then it may be worth staying with them (provided you’re on the right level of cover and you’re happy with the customer service). If they can’t then it’ll be worth your while to switch and save money.

The only way to find out how much you could save on your next policy is by comparing quotes now for free. Simply tap the button below to get started – obligation-free: