Not shopping around for car insurance could be costing you over £300,000!
Quite a dramatic statement, I know. However, it is not an unrealistic one.
Before we get into that, I would like to draw your attention to a previous article we created here at moneystepper. It investigates the need for insurance and how, when it is not required, how much money it could be costing you:
A very basic example is insuring your TV against damage beyond its warranty. In this example, the manufacturer offers a 12 month warranty, and then you have the option to buy an additional 12 months insurance. However, this is a waste of money for the following reasons:
- Modern day TVs are made so that they do not break in the first 24 months. Other there is a malfunction which will mean it will break in the first 12 months, or otherwise it will breakdown due to wear and tear a long time after 24 months.
- You should only take out insurance on something you cannot afford to replace. This is what insurance originally was. It is the insurance that, if something breaks and you cannot afford it, then a group of people will help replace it (beginning with sea vessels). However, if you cannot afford to replace your TV, you shouldn’t be buying this TV in the first place!
The conclusion of this article was:
“Only take out insurance if you cannot afford to pay for the product/service which is being insured…”
This applies across the board. Insurance premiums are always set at a price which means that the insurance provider (the big insurance companies) will win, and the person taking out the insurance (you) will lose.
However, there is a very important exception to this rule:
“…unless you are legally required to do so.”
Some insurance is mandatory. Buildings insurance if you are a landlord, for example. The most common legally required insurance is car insurance. It is therefore essential that, when you are buying car insurance, you get the best deal possible.
Car insurance – A “Real Life” Example
This morning, Saturday 8th August, I’m going to look for car insurance on the brand new BMW z4 which I just bought. Unfortunately, this is the part of the story which isn’t “real”. Just to note: unless you have a million pound net worth, you should not be buying this car!
However, this fictitious car (for the purposes of making a comparative example between providers), is a 2013-14 BMW z4 SDRIVE 1.8l, 1997cc petrol, 2door, Manual and costs £29,485.
It is used for social, domestic, pleasure and commuting. My annual mileage will be 15,000 per year. The car will be kept at home, on a drive way. I’m the only driver to be insured and am a 29 year old male accountant, who owns my home, has no children and has a “single” marital status. I have had my license for 11 years and have had no previous claims or convictions and 11 years no claims. I want comprehensive cover and voluntary excess of £500. My current provider is Tesco Bank.
Let’s have a look at a couple of results:
1) I stick with my current provider – Tesco Bank. This provides me with the following:
The quoted price on a popular price comparison website is £1002.56 per year.
2) I opt for the cheapest comparable cover.
This doesn’t include motor legal protection, but I will add this for £26.99. Including this addition, the price with the cheapest provider is £269.92 per year.
Therefore, by shopping around, I have saved around 75% of the original quote. And, where does the figure of £300,000 in the headline come from, I hear you enquire?
Well, in the example, I stated I was a 29 year old male. According to the AAA: “fatal crash rates increase from the age 75 and rise sharply after the age of 80.”
Therefore, assuming I will drive from now until the age of 75. If I save £732.64 every year for the next 46 years at 8% annual return (after inflation has been taken into account), this amounts to a whopping £306,556 (in today’s money) when I am 75.
If this wasn’t reason enough to start shopping around for your car insurance, always consider cashback or other related bonuses. For instance, with the cheapest deal above of £269.92, you could also earn another £55 cashback just by visiting their website through Quidco. If this sounds too good to be true, or you don’t know what Quidco is, you are in for a treat:
It doesn’t end there. Insurers are getting pretty creative and you can also use this to your advantage.
For example, car insurer LV= is currently running a “How many takes did that take” competition, where you can win an iPad mini each week:
Also, they offer free music downloads and you can also enter a twitter competition by submitting your picture of a heart-shaped photo to #LVthat for a chance to win a Love2Shop voucher every week.
Whilst moneystepper firmly believes that insurance should only be taken out when it is “required” (either legally or because you cannot afford to replace a product/service that you need to have), the importance of shopping around to find the best deal is so important and can lead to remarkable savings.
Don’t just stick with your current provider every year because it is easier. Remember, this could be costing you £300,000!
Also, don’t forget to see what other additional bonuses, offers and prizes that you could take advantage of whilst shopping around for your insurance.