Are you paying more insurance because of your job situation?
Although the cost of car insurance is generally falling, some drivers are faring less well than others. The latest analysis from MoneySuperMarket reveals those out of a job are paying a high price for being unemployed.
Jobless drivers are forced to pay 58 per cent more for their car insurance compared to the average premium. The average cost for car cover falls in at £390, compared to £617 for those currently unemployed, a huge increase of £227.
While insurance premiums have gone down across the board in the last year, those who are unemployed have not felt the benefits nearly as much as those in work. In Q1 2013, the average premium for those without a job was £630, meaning this fell by only 2 per cent over the year to the current price of £617. This compares less favourably to the decline in motor insurance costs overall, as premiums fell from £439 in Q1 2013, to their current rate of £390; an 11 per cent decrease. The gap between those unemployed and the average premium was 44 per cent in Q1 2013, vs. 58 per cent in Q1 2014.
Kevin Pratt, car insurance expert at MoneySuperMarket, said: “Many of the reasons for unemployed drivers being classified more ‘at risk’ are contentious, but there is no escaping the fact that car insurance is much more expensive for the unemployed. Employment status is one factor insurers use to calculate car insurance premiums, as well as others including age of the driver, location, type of car, and driving history.
“As car insurance is a legal requirement those who are likely to be struggling financially are least able to afford these higher premiums and in some cases might be priced out of being able to insure their vehicle.
“It is easy to see how this can become a vicious cycle of not having a car to help find and get work because they don’t have an income to be able to afford to drive it. It could also be a huge barrier for those seeking employment, especially in rural areas where people depend on having their own vehicle, as well as a factor where potential job opportunities involve working unsocial hours.”
The analysis from MoneySuperMarket also shows the gap between the average cost of car insurance versus the average cost for the unemployed was at its highest in Q3 2013, with those out of work paying 63 per cent more for cover. Those who purchased their car insurance during this period should definitely shop around at renewal time as there should be savings to be made. The average unemployed driver policy is now £24 cheaper than six months ago and, with the best prices typically offered to attract new customers, even a low renewal price from your existing insure could be beaten.
Kevin Pratt continues: “If you’ve had the misfortune to lose your job, you’ll need to inform your insurer about your change in employment circumstances to avoid the risk of invalidating your insurance by not keeping your details up to date.
“Being honest about your job status is the best policy but it will mean you are classed as higher risk and you could be charged more as a result. But there are plenty of steps you can take to find cheaper car insurance if you are unemployed. The first port of call should always be shopping around online to find the best combination of price and protection.”
MoneySuperMarket’s top tips for unemployed drivers:
Don't just renew: There are few rewards for loyalty when it comes to insurance, so never automatically renew with your existing insurer.
Pay upfront: While it may be tempting to spread the cost of your car insurance premium over a year, it makes better financial sense to pay for premiums upfront if you can, as most insurers charge interest on monthly payments.
Keep mileage to a minimum: A simple way to keep a lid on the cost of car insurance is to drive fewer miles. The less you drive, the lower the premium - plus you will also make savings on petrol and running costs. But be accurate about your mileage when applying for insurance or you risk invalidating your cover.
Pare down cover: Another easy way to reduce premiums is by stripping out extras from your policy, such as a courtesy car or legal expenses insurance.
Choose a smaller car: Given that insurers categorise cars into 50 different groups based on factors such engine size and the likely cost of repairs, you can make savings by opting for a smaller car in a cheaper group.
Don't modify your motor: Resist the urge to make modifications to your car, such as spoilers or tinted windows, as this can result in a higher premium.
Improve security: Further savings can be made by parking your car off-road or in a garage overnight and fitting an approved alarm.
Increase the excess: You may also be able to get cheaper insurance by increasing your voluntary excess. But if you do this, you need to ensure you can still afford the excess if you have to make a claim. If not, you might find yourself in position where you can't get your car back onto the road.
Consider telematics: In recent years, more drivers have opted for a “black box” or telematics car insurance policy. This type of car insurance rewards safe and sensible driving with discounted premiums.
Drive carefully: It may sound obvious, but if you drive with care and obey the rules of the road, you will reduce the chance of being involved in an accident or getting points on your licence. This should help you keep costs down.
Protect your no-claims bonus: Another good way to keep costs down is by building up your no-claims bonus. This can help you knock 70 per cent or more off motor insurance premiums after five years without making a claim. If you do have a minor accident, the key is to weigh up whether or not it's worth claiming, or whether it makes more sense to simply pay for the repairs yourself.
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