Car insurance - a comprehensive guide

For the consumer seeking motor insurance, their biggest enemy is not the cheese-paring insurance companies that are keen to gather in the premiums but seemingly less than keen to fully support your claim. Nor is it the underwriters who, in cahoots with the actuaries, seemingly conspire to shift the risk from the insurance company to you through higher premiums. No - the biggest enemy of the consumer is their own apathy!

When was the last time you checked the small print on the policy to ensure that it actually covers you for what you assume it covers you for? The last time you renewed? The time before that? Never?

We all know that car tax is going up, and we can also see our motor insurance premiums creeping up from last year. But what isn't widely known is that some insurers are surreptitiously dropping clauses from their fully comprehensive motor cover that many consumers assume are there. Not that this matters until you need to make a claim; but if you do, you could be in for a nasty shock when you discover that, increasingly, "Fully Comprehensive" doesn't mean what you think it means.

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Why car insurance costs keep rising

Even before the credit crunch and the clouds of economic gloom that have gathered over the past few months, insurers were feeling the pinch of consumers using sites such as this to compare prices for car insurance and then going with the cheapest provider. Loyalty is also something consumers have little of these days. It has been suggested that the number of consumers renewing their car insurance with their existing insurer has dropped to 65% from 80%.

According to the AA, soaring fuel prices, heavy loss of resale value and increased insurance costs have sent the average cost of running a car in the UK up 11% in the past year, with insurance premiums alone up 6% in the past 12 months. But the AA also says insurers continue to be squeezed between increasing costs and competitive pressure and that, for every £100 taken in premiums, the industry shells out £112 in claims. The AA says that, if premiums don't continue to rise at a realistic rate, there will be a point when large premium increases become inevitable and "that would be unhelpful for customers and will damage the reputation of the industry".

But in order to stay competitive, many insures are keeping a rein on premium increases and are saving money by cutting cover in fully comprehensive policies. Not that many will come right out and say so, but here's a question for you: if you have fully comprehensive motor cover and you need to drive someone else's vehicle, then you're covered arent you? Chances are, you're not.

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Why 'fully comp' isn't

According to research from Liverpool Victoria, 51% of people assume they have this cover as standard on their policy, although many insurers don't include it anymore but have failed to publicise the fact. LV's fully comprehensive car insurance includes this 'Driving Other Cars' cover and believes its withdrawal would simply increase the instances of uninsured driving. But there's a clear misconception amongst motorists that this cover exists on all comprehensive policies and can be used at any time. However, if it exists in your policy, it should only really be used in emergencies or as a one-off, not simply as an excuse to borrow the vehicles of family and friends when it suits you.

Another aspect of comprehensive motor cover that insurers are quietly dropping to save money is the courtesy car when yours is off the road. Again, many people assume that, if they have an accident and their car needs repair work, the insurer will provide a replacement. Even if the courtesy car is part of the deal, it often comes with lots of caveats - you have to use the insurers' network garage, or the courtesy car is only available if someone else is at fault.

Following last summer's deluges and floods in the West Country, the insurance industry dealt with over 180,000 claims costing in the region of £3 billion and motorists with fully comprehensive cover were covered for flood damage, according to the Association of British Insurers (ABI). The ABI has also gone to great lengths to ensure the insurance industry will continue to cover people at risk of flooding. But this is for property and makes no mention of motor cover. If you live - or holiday - in an area with a high risk of flooding, either ask your insurer or check that your policy does indeed cover your vehicle if you wake up one morning to find it has become a submarine.

Automobile breakdown and car recovery cover, roadside assistance and repair service.

15 July 2008 © Moneyextra.com

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