Five Insurance Myths
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Below are some stories and anecdotes about motor insurance (by Alexander Popple, Courtesy of cars.uk.msn.com).
To help you avoid the pitfalls, we explode five common misconceptions:
- Your premium can’t go up if you have no-claims discount protection.
Yes it can. When you protect your no-claims, you protect the percentage discount you get off your basic premium. However, your basic premium can still rise for various reasons; many of which are not directly connected to you. For example if there is a spate of car thefts in your area, insurers may decide that it is a higher risk area and increase basic premiums.
Some insurers’ small print, however, says they can increase your basic premium based on your claims history – in other words, if you claim, they reserve the right to put up your premiums despite your protected no claims discount.
You’ll still get your discount – but taken off a higher starting price. Is this likely to affect you? "One claim is unlikely to affect your premium," Dave Swann, chief underwriter at Zurich insurance, told us. "It’s only if you have an unusually high number of claims in a given period that an insurer would be likely to revise its view of the risk level."
- Speeding fines won’t affect your insurance.
Up to a point, this is true however, there are exceptions. We’ve heard reports that some of the more cost-conscious (ie, cheaper) insurers won’t allow even one. And any insurance company would take a dim view of a more serious transgression, especially if it results in a ban. So it’s worth remembering that the courts can – and regularly do – impose bans if you’re caught exceeding the speed limit by a wide margin.
- You can’t get insurance if you have a serious driving conviction.
Watch your speed: tickets may increase your premium.
You can – but it will cost you more and you may have to be a bit more patient. Generally this means drink or drug related offences, offences such as dangerous or careless driving or any offence that results in a ban. You can also find that a number of more minor offences (for example, speeding) will spell trouble cumulatively. If you have such a blemish on your driving record, the simple fact is that you represent a higher risk, and that will cost you money – anything between a 25% increase, up to the doubling of your premium, or even more.
"Insurers may also limit cover. For example, you might have to pay a higher excess in the event of a claim or you might be limited to a third-party fire and theft policy," explained David Swann of Zurich. However, the exact details will depend on the case. "If the person is an experienced driver with an otherwise sound driving history, then we would look more sympathetically at the situation, especially if they are an existing policyholder," he says. "Other factors would include the person’s age and the type of car, and how long it is since the offence took place. Obviously beyond a certain point convictions are ‘spent’ – after that point customers need not tell us about them and we cannot take them into account in any case."
Premium loadings may also be less if the convicted person is a named driver who only occasionally drives the car rather than the policyholder. All this detail means that to get the best premium, you need to find an insurer who’s prepared to look carefully at your individual circumstances.
Many of the well-known direct insurers who advertise heavily, and go after the low-risk bulk business, aren’t unusually keen to do this – they may quote ludicrous figures, or decline to quote altogether. It’s well worth contacting a specialist insurance broker if you’re in these circumstances. They are experienced in finding insurers willing to take on unusual risks and look at each case on its merits. They’re more flexible than the bucket-shop insurers and willing to take the time to try to help find cover at a reasonable cost.
- Avoid reporting minor accidents – they’ll put up your premium.
This generally isn’t the case – and ironically, failing to report them may in itself invalidate your insurance. Most insurers require you to report any incident that could result in a claim as a condition of insurance. "This is as much to protect the policyholder as to protect us," says Mr Swann. "Generally, any incident could result in a claim by a third party." And since the whole reason for having insurance is indemnity – that is, protecting yourself against loss – you need to pass that risk over to your insurance company by telling them what happened. And just reporting an incident doesn’t necessarily mean the insurance will have to pay anything out.
In any case, premiums are based on risk, not the number of claims. Of course, if you make a lot of claims that means that you’re a high risk customer - but insurers will only increase your premium if they think you’re higher risk than the average person. So as long as you’re not more accident-prone than the average person, you’re in the clear. Mr Swann points out that 20% of policyholders suffer some kind of incident each year.
- My insurance quotes are too expensive – I’ll save money by putting the insurance in someone else’s name.
On today's crowded and complex roads, anyone can get in an accident. As long as you're not more accident-prone than average, it shouldn't cost you a higher premium.
Nice idea. Won’t help. You may think that putting the insurance in someone else’s name and having yourself as a named driver will be a clever way to cut your premium, but insurance companies cottoned on to that years ago. They’ll ask you how many cars there are in the house and how many drivers, and who mainly drives each car. Answer less than truthfully and you might find your cover is invalid. Premium levels will principally be determined over who has access the car – only if you are genuinely an ‘occasional’ user of the car will the premium be reduced.
This trick may not help you, but that doesn’t mean all hope is lost, especially if you’re an experienced driver. If you have a clean and accident-free driving record, even if you haven’t had insurance in your own name, your insurance company may still offer you an introductory or no-claim discount. Tell them the whole story and you might be surprised.