Why are insurance costs so high for new drivers? (And what can be done to reduce them?)

The thrill of passing your driving test and the subsequent freedom of owning your own car are two feelings that are hard to beat. The only thing to ruin the excitement is the dreaded insurance costs. Whether we think insurance companies are justified in their pricing or not, the average first-year premium for a new driver aged between 17 and 25 is £1,400, and that doesn’t decrease much for older first-time drivers. But why is that? And how on earth can we get those costs down to something that’s a little bit more affordable? Well, here are a selection of insurance saving tips for new drivers, as well as some general advice on how not to get stung when looking to get insured.

Why is it so expensive to get car insurance?

Insurance companies base their premiums off of three things: statistics, the risk you present to other road users and the experience – or lack of it – that you have. As a new driver, especially if you’re younger than 25, the statistics are not in your favour. You don’t have a no claims bonus building up to show you’re a safe driver, and, in 2018, 17% of all casualties in road accidents were drivers aged between 17 and 24, so insurance companies see your risk level to be much higher.

Does it affect me even if I’m over 25?

Unfortunately, yes. There’s no getting around expensive first-year premiums. While your age doesn’t play as much of a factor, your lack of experience and confidence on the roads certainly work against you. That lack of no-claims bonus is the biggest contributor towards bumping up insurance premiums.

Is there anything I can do to reduce my risk/insurance costs?

There are a wide range of options, tips and tricks to help reduce your first-year’s premium. Here are ten of the best ideas to save up to a few hundred pounds on your car insurance – but never, ever lie about anything when taking it out. To do so is to defraud your insurer and, in the event of a claim, your insurance could be invalidated, and you might end up facing prosecution.

Have your car fitted with a black box:

A really good way to prove to insurance companies how safe you are at driving is to have a black box fitted. This device monitors your driving style and when and how often you drive to give you scores and a few tips to improve your scores. Most offer a reward system and significant discounts on subsequent policies on top of your first year’s no-claims bonus if you don’t have an accident. Most insurance companies now offer a black box incentive, so consider everything else you get with the policy before making your choice. Try and choose a black box where you can track your progress on an app or where you get regular feedback to improve your driving style. Not all black box policies impose a curfew, but if yours does have one, stick to it. Your insurance could be invalidated or cancelled if you’re constantly driving outside the hours you’re insured for.

Add extra drivers onto your policy:

Having one or more experienced driver named on your insurance policy is a great way to reduce costs. If they’ve got a clean driving licence and several years no-claims bonus, insurance companies consider the risk reduced because at least some of the driving will be done by a much more experienced driver. If you follow this route, make sure that you’re the main driver and the policy is in your name. If you drive the car most of the time but the experienced adult is the named driver is called ‘fronting’ we mentioned earlier.

A couple of other options to consider are multi-car insurance and becoming an occasional named driver on another policy. With a multi-car policy, you can have up to six cars registered to the same address, each with their own level of cover and excess. You can have multiple cars join the policy where their insurance renewal dates come around and you’re likely to save a bit of money as well – perfect for a first-time driver.

Becoming an occasional named driver on another car is great if you’re unlikely to drive very far or very often, making it a good option for younger drivers as a result. However, there are a couple of downsides to this option. Firstly, adding a new driver will increase the price of the existing policy. This is down to the increased risk from the insurer’s perspective. Secondly, it’s less convenient as you’ll only be able to use the car when the named driver isn’t using it, so your level of freedom is certainly reduced. However, if you can’t afford to run a car yourself, it’s certainly a cost-effective way to build up a little bit of experience.

Choose the right insurance bracket for you:

Whenever a new car is released, a panel of experts have to decide on what insurance group it is going to be placed in. They use a scale of 1 to 50, with insurance group 1 being the cheapest and insurance group 50 the most expensive. To work out where each car should go, the panel considers value, repair costs, the cost of the 23 most common parts, performance (acceleration times and top speed) and security features for the specific make and model. This process means that the latest Ferrari is going to be in a much higher insurance bracket than the latest Hyundai. For new drivers, especially those under 25, the gold standard is finding a car to get you into insurance group 1 or 2. To find out which insurance bracket your prospective car is in, (or if you’re an older driver curious about what group theirs falls into), check out this handy comparison tool.

Can you alter your job title to make it sound more appealing to insurers?

A word of warning – do not lie to your insurance company. Ever. As we mentioned above, you could get into serious trouble if you do and then try to make a claim.

Insurance companies think that certain jobs are riskier than others, based off of data from previous claims. You’re likely to pay more if you’re unemployed or in a job where there’s typically a lot of traveling. But did you know you could get around this by carefully considering what you actually do and seeing if there’s a subtly different career option to reflects this?

As you can see, by exploring all your options, you can save up to a few hundred pounds. Just make sure it’s a job title very similar to what you actually do. For example, if you’ve always put down ‘labourer’, what sort of labour do you do?  If you’re a builder, maybe consider choosing the ‘bricklayer’ option instead? Just don’t choose an option which is a complete lie – we can’t stress this enough.

Shop around to save:

Never, ever, ever just choose the first deal that you find. It’s a simple tip that will always help you save money, not just with car insurance. As with everything, it has to be a good deal for you. Otherwise what’s the point in investing so much money? Consider every option before you choose a policy and, where possible, haggle to see if the insurance company is willing to match another quote that you’ve found. This becomes especially important when you come to renew your insurance in the second year as you’ll never get the best possible deal by auto-renewing.

What cover is best for you?

The type of insurance you take out will affect the level of cover you receive but also the price you’ll pay. Comprehensive cover protects both your vehicle and any other vehicle involved in an accident, whereas third-party only covers other vehicles. Consider what you can afford to pay in the event of a claim but also how often you’re going to drive and how much you care about the appearance of your car. If you’re not going to be bothered by a few dents and scuffs, third-party is a good idea for you, but it could end up being more expensive. This is because it’s such a popular option with younger drivers, and so many more claims are made against third-party insurance. As with anything, comparison is key. Don’t rush your decision.

Don’t modify your car:

Insurance companies hate this. Adding any sort of modification to your car automatically increases the cost to insure it because they think it increases the risk of you having an accident and thus making a claim. If your heart is set on modifying your car, don’t think you can get away without telling your insurance company. If you try and claim on a car that isn’t the exact one covered by your policy, you’re unlikely to have it accepted. This applies to modifying your car a few months into your policy as well, so keep your insurance company aware of any changes you might make.

Change your payment method:

It’s cheaper to pay upfront than to pay monthly on a direct debit scheme. How? Well, you’ll be charged interest on monthly payments by your insurance company but not if you pay the entire lump sum up front. You can often save yourself a couple of hundred pounds this way – the only downside being that a new or younger driver will have to find around £1,000 to spend in one go. Go with whichever way works out as most affordable for you, but make sure you have the complete breakdown of the monthly cost first.

If you can increase your excess, do so – but be sensible:

An excess payment is the cost that you will pay should you make a claim against your insurance policy. There are two types: compulsory excess and voluntary excess. Compulsory excess is set by your insurance company and is the fixed fee that you have to pay should you make a claim. For a young or new driver, this could be the first £400 of the total cost of any claim. You can then choose to pay extra on top of any claim in return for a reduced premium. Insurance companies like this because they don’t end up paying out as much money towards a claim.

However, you will need to be able to afford to pay both up front in the event of any claim – so be careful about raising your voluntary excess too high. If you set your voluntary excess as £300, for example, make sure you can afford a £700 one-off payment at any point. If you don’t have much disposable income, it might not be worth setting a voluntary excess at all. Consider the long-term implications before you look for short-term financial gain.

Increase security:

Your car will have been assigned a security rating of E, A, P, D or U, when it was assigned its insurance group. E and A mean it has the best possible security and U means the security level is considered unacceptable. Insurance companies like cars with more safety features so if there’s anything you can do to increase the security of your car, such as fitting an immobiliser or an alarm, consider doing so. It might cost a bit of money to install, but it could lead to a significant discount on your premium as well.

Obviously, it won’t be practical or affordable for you to follow all of these tips or avoid paying a significant amount for your first-year’s insurance – that’s just the unfortunate nature of the game. The easiest way to save money is to drive safely and build up your no-claims bonus because, when it comes to saving on your car insurance, experience counts. That doesn’t mean you can’t get a good deal in your first year though – you’ve just got to know where to look and what to do.

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