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The 5 biggest car insurance myths, and the truth behind them

14/06/2021

Creditfix > Blog > Creditfix Debt Help Blog > The 5 biggest car insurance myths, and the truth behind them

 

Car insurance is something that every driver needs to purchase in order to make their vehicle roadworthy. But while over 75% of the population in England hold a valid driver’s license, there are still a lot of us out there who don’t fully understand how our car insurance works.

In the latest in our mythbusting series, we’ll take a look at five of the most common myths relating to car insurance, and reveal the truth behind them.

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1. You don’t need insurance if you don’t use your car

If you have a car that’s gathering dust in the driveway, and hasn’t seen the road in years, you wouldn’t think you’d need to insure it. And you’d be right, as long as you follow the necessary steps.

It’s not enough to simply not drive your car. Unless it is officially designated as ‘off the road’, every single car needs to be insured by law, even if you never drive it.

There is an official process you need to go through to declare your car as off road, starting with obtaining a Statutory Off Road Notice (SORN). Next, to keep your car off-road, you’ll have to store it in private property, like in your driveway or garage.

If you don’t follow the official steps to declare (and keep) your car off-road, you will be expected to pay for the vehicle to be insured, or you could find yourself in trouble with the authorities.

2. Paying your car insurance monthly works out cheaper

There are a lot of people who find a monthly subscription is a convenient way to cover the cost of things. Think of your Netflix account, gym membership, or even a season ticket for your favourite football club.

Car insurance is no different. It’s possible to take the cost of your annual car insurance premium and spread it over twelve months, allowing you to avoid paying a sizable fee upfront.

Just because paying up your insurance this way is possible, however, doesn’t mean it’s cheaper.

The convenience of the subscription model comes at a cost, with insurers usually charging you a deposit upfront, and applying interest that can make the overall cost of a monthly payment more expensive than paying for your insurance outright.

3. If I don’t claim, my premium won’t go up next year

The no claims bonus is the holy grail in the world of car insurance. It’s a discount that can be applied to the cost of your car insurance depending on how long you have been with your provider and how long you’ve gone without making a claim.

Because the no claims bonus is so well known when it comes to car insurance, many people mistakenly think that going a year without claiming will mean their insurance premium will remain the same, if not become cheaper.

While that’s understandable, it’s also not strictly true. If you’re in your first year with a certain insurer, for example, your policy will typically go up in price in your second year whether you make a claim or not.

Conversely, if you’ve been with an insurer for a very long time, you may have already received the maximum discount for your no claims bonus, or have reached an age where you’re considere a bigger risk, which can cause your premium to go up even if your record of claiming is flawless.

4. I won’t need to pay excess if a claim is made that wasn’t my fault

The whole point of car insurance is to make sure you’re covered in unfortunate situations, and there’s few things more unfortunate than someone crashing into you and causing expensive damage to your vehicle in an accident that wasn’t your fault.

In this situation, many people understandably think that they won’t have to pay a penny to their insurer. After all, why would you have to pay towards your excess when it’s been proven that someone else was at fault?

That’s not how car insurance works, however. Even if it’s established that an accident wasn’t your fault, you may have to pay money towards your insurer upfront, though you may be entitled to a refund later. That’s why you should always read the terms of your agreement carefully, and make sure you have enough cash to cover unexpected costs.

5. If I stay loyal to my insurer I’ll get a better rate

A lot of people mistakenly believe that the longer they stay with their existing car insurer, the cheaper their insurance rate will eventually become.

You can understand the logic. If you show loyalty to the provider you have always used, they’ll return the favour by ensuring their most loyal customers get the best car insurance rates.

Unfortunately, that’s not always the case. While the convenience of staying with your current insurer is a strong factor, it may be hurting you financially – with car insurance, often the best way to get the most favourable rates is to shop around.

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