Car Insurance for Young Drivers Tips, discounts, cashback & more

Whether or not you're a young driver, insurance premiums (the name of the payments made to insurance companies) depend on three things:

By reducing an insurer's perception of your risk, you can reduce the price you'll pay.

Car insurance rates are set by actuaries, whose job is to calculate risk. Make sure you're as little of a risk as possible, and you can make big savings by showing an insurer that you're not the typical high-risk young driver. Each insurer's price depends on two things; first, the underwriters' assessment of your particular risk focus, and then the pricing model that dictates the type of customers the insurer wants to attract.

• Do fit a security device.
  
  Any extra security will help; fitting an alarm or immobilizer (especially one approved by Thatcham) will reduce the bill substantially.

• Do park and drive carefully.
  
  Theft and accidental damage add a wedge to insurance costs. If you leave your car in a garage or driveway it's a big deterrent to theft and means accidental damage is less likely, resulting in a 3% - 7% drop in insurance costs.
  
  Plus the more points on your licence, the higher the cost. While speeding points remain on your licence for four years, insurers usually check for convictions during the last five before they are removed from your record.
  
  One speeding conviction may only affect the price of cover by around 5% - but any more'll bump up the price, with two offences costing around 20% more.
  
  Being caught with a mobile phone is more serious, and can double your quote. It can also give you three instant points on your licence, which stay on for four years. Approved hands-free kits are fine if used properly.

• Do reduce your mileage.
  
  The less you drive, the cheaper your insurance will be. Where possible, try and reduce your mileage. This may sound trite, but actually the real key is incorporating the extra insurance cost when you make long journeys, not just the cost of petrol compared to taking the bus or train (also read Cheap Trains article).
  
  Anecdotally, though many simply get a quote for 10,000 miles per year, MoneySavers have reported that 5,000 is the best figure to use - though we haven't tested this. If you drive your vehicle on business, always declare this rather than just include the business miles as personal, or the policy may be void.

• Do look at additional driving courses.
  
  PassPlus:This Driving Standards Agency course is aimed at helping new drivers (within 12 months of passing their test) become more confident on the road. There are six modules: town driving, all-weather driving, driving out of town, night driving, driving on dual carriageways and driving on motorways.
  
  The cost of the course is about £200 but varies depending on where you live and the instructor or driving school you choose. Yet some local councils offer discounts of up to 50%, usually for those under 25, and in Wales it only costs £20 (check if your council is taking part).
  
  Once you have the certificate some insurers discount the price of your insurance, but there are not many that do (see a list). Sadly it's become less and less recognised in the last few years so the discounts aren't generally that high, and there's a high chance you could get cheaper cover elsewhere.
  
  Drive iQ: This new course for learner drivers, provided by the AA and independent driving schools, combines online learning with practical lessons. It costs £150, on top of the cost of your lessons, and results in a BTEC qualification (equivalent in level to a GCSE) as well as your license if you pass.
  
  As well as standard teaching it covers attitudes and behaviour to driving, rather than just car control skills, during five units which include motorway and night driving. It says, once you’ve passed you’re eligible for exclusive insurance deals, but check quotes with Drive IQ before you sign up to see how it compares.
  

Before we begin, it's important to understand that there are three different types of car insurance: third party, third party fire and theft, and fully comprehensive (full definitions below).

Logically, third party insurance should be cheapest for young drivers as it offers a lesser level of cover than fully comp - yet this isn't always the case. So get quotes for third party and fully comp just in case it's cheaper. Plus always make sure you check your policy so you know exactly what you are and aren't covered for in the event of a claim.

While it's likely third-party buyers are on average a higher-risk group, perhaps as overall they care less about their cars, and so prices are pushed up. To illustrate this, in one low-risk driver quote we found £290 for fully-comprehensive, compared to £406 for third-party. This isn't a hard rule, but always check both.

Third Party

The minimum level of cover you need to legally be able to drive on the road is called 'Third Party'. It used to be the cheapest type of insurance, but bizarrely fully comprehensive policies can now sometimes be cheaper.

Third Party covers you for any damage you cause to another person's vehicle, and gives protection for any passengers in your car.

Therefore, if you're in an accident and it's your fault, you'll have to pay for any repairs to your own car yourself, as your insurance won't cover it. It may be more expensive because it's assumed you care less about your car and are therefore more likely to have an accident.

It's generally the most suitable for those:

• With cars worth less than £1,000
• Aged under 25
• Without a no-claims bonus
• Living in a high risk area

Third Party Fire and Theft

Third party fire and theft has the same level of cover as third party insurance. However, self evidently, it also has the additional cover of assistance if your car is stolen or set on fire.

Fully Comprehensive

This is the widest level of cover, but can sometimes be the cheapest. The big advantage is that if you have an accident and it was your fault ...

you'll be able to claim the cost of repairing your car, and cover personal injury costs, as well as those of other drivers.

The cover also includes accidental damage and vandalism, for example if somebody causes damage to your car when it is parked in the street and drives off.

Plus you'll usually (though not always, so do check your policy details carefully) be able to drive other people's cars if you have their permission, although this is likely to only be Third Party. Sometimes you'll be covered for driving hire cars too.

Fully Comp is a good idea if your car is worth more than £1,500, and gets more important the more valuable you car is. Many insurers will only offer fully comprehensive cover for higher value cars anyway.

There are a few ways of cutting the cost of fully-comprehensive cover. For example, Tesco Value insurance offers a comprehensive policy but has a higher compulsory excess, which lowers the cost. However, this doesn't automatically make it cheapest; ensure you first use the comparison sites above to check.

If you're under 25, insurance can cost a fortune. Yet by adding a second driver to the insurance, even if they won't use the car often, it can smooth out the average risk and sometimes reduce the premium. Those with an additional record for driving well are likely to help make bigger savings, but anyone that's in a lower risk category than you can help.

It won't always work, but it's worth playing with quotes to check. Yet don't confuse this with 'fronting', which is illegal - more below.

If it's your car and you will be the main driver of it, don't be tempted to put someone else down as the first named driver. Young car owners who list parents as the main driver to cut insurance costs are doing what's called 'fronting' - and it's illegal.

This route may be suggested by well-meaning parents who aren't aware that they're doing anything wrong, and are keen to get a cheaper quote. Yet the consequences can be very serious; it invalidates insurance and can lead to prosecution, so don't do it.

If you haven't got 'normal' circumstances, eg, you've made a claim in the past few years, have a modified car or expect to drive 100,000s of miles a year, tell the insurer. If you don't and then try to claim, even for an unrelated issue, your whole policy may be invalid.

Plus you should also tell your insurer about any changes. This is crucial as it reduces potential problems in the event of a claim, even if it's just your address. Trying to get insurance after you've had a policy cancelled due to a fraudulent claim is very difficult, very expensive and will follow you for the rest of your life.

A change in circumstances includes moving jobs, as insurers believe this can affect your risk. Scandalously, the unemployed often (though not always) pay higher rates for their car insurance, so do inform your provider if you're out of work but also do the full checks below to see where you can get the cheapest cover.

Sexy it might be, MoneySaving it ain't. The more changes you make to your car, barring security ones, the more you'll be charged.

Always make sure you inform your insurer of any modifications to your car, whether you made them or not, or it may invalidate your policy. A modification is anything that isn't part of the standard vehicle specification, including factory fitted optional extras such as alloy wheels.

It's worth considering going for a policy with a higher excess (the amount of any claim you need to pay yourself). Many people will find that claiming for less than £500 worth of damage both increases the future cost of insurance and can invalidate no-claims bonuses, meaning it's not always worth making a claim.

So why pay extra for a lower excess? A few policies will substantially reduce premiums for a £1,000 excess, so try this when getting quotes. The downside of this is if you have a bigger claim you'll have to shell out more, so do take this into account.

With insurance, remember - the golden rule is:

If you've read these tips and thought, 'it's easy to lie about this', then of course you're right. Yet lying on your insurance form is fraud. It can lead to your insurance being invalidated and, in the worst case, a criminal prosecution for driving without insurance. Don't do it.

If you've two or more vehicles between friends or family members in your household (Vans can be included in this but Bikes usually aren't), some providers offer discounts if you insure them all together. Comparison sites don't have the technology to do these searches, so you need to compare manually.

First, use comparisons for each car separately. The discounts are usually around 10%, so often it's likely just finding the cheapest standalone insurer will win anyway. So always do a comparison first (see combine comparison sites below), then try the deals below to compare.

Get all cars on one policy. Cover two cars and Admiral* will give up to 12% discount, cover four or five and you could get up to 24% discount. All cars will then be covered on one policy so the renewal date will be aligned to end at the same time.

Separate policies but still get the discount. Other insurers allow cars to have separate policies but give a discount as long as the vehicles are in the same household. Privilege* gives up to 10% off, Direct Line* 10% off (first year – second year is 5%), Churchill* (who also cover named drivers on another Churchill policy) up to 10% off and Aviva* up to 15% off.

Plus while it says it gives reductions, Tesco doesn't say how much the discount will be, so check before you buy.

The combination of popularity, engine size and value all impact car insurance cost. It's worth considering this when you buy; insuring a super-powerful beast of an SUV for a 17 year-old would cost enough to make Bill Gates weep.

Unfortunately there are several reasons for this - young drivers are less experienced than older road users, bringing them into a higher risk category with insurers. Less experienced drivers are likely to have more accidents, and therefore put in more claims to their insurers - so insurance companies make their premiums more expensive to compensate.

Yet by driving carefully you can help to offset this and lower your premium - see above for more.

Beware 'pay monthly' options - usually the insurer actually just loans you the annual cost and then charges interest at hideous rates on top. So either pay in full, or if you can't afford it, use a credit card with a lower APR rate (or better still, a 0% credit card for spending ensuring your repayments are big enough to clear it within a year.)

Yes - cars must be insured unless declared off road. From 20 June 2011 the Continuous Insurance Enforcement scheme means all cars must be insured - even if no one drives them. The aim's to crack down on two million uninsured drivers by matching up the database of cars and insured drivers.

The only way out is to apply for a SORN (Statutory Off Road Notification) declaring that your car will never be driven. Ensure you search for the new cheapest in advance of renewal, or you'll end up just auto-renewing to stop the fine.

If your insurance allows it, driving someone else's car instead of yours can be a way to cut mileage. Check your policy details carefully to find out if you can.

If you have fully comprehensive insurance then often, although not always, it includes what’s called ‘driving other cars’ cover. This provides you with Third Party cover whilst reducing your mileage and therefore the cost of your own policy.

Generally, insurance is a lot cheaper for a moped or motorbike than for a car. Plus, some insurers may put any no claims bonus from bike insurance on your car insurance too if you later get your car insured with them. Yet do take safety into account as a new driver - if you're in an accident you're much more protected if you're in a car. See the bike insurance guide for more.

Brokers and screenscrapers may seem like they're doing a similar job, as each search a number of different insurers; yet they're radically different beasts. A good analogy for this is to compare it to searching for the cheapest loaf of bread.

Individual insurers are like bakers, your choice is simply to buy its cheapest loaf that suits.

Brokers are like supermarkets; they stock a range of bakers' loaves and the price charged depends on their relationships with suppliers.

Screenscrapers are like sending someone round supermarkets and bakers to note all their prices.

Some schemes do offer an accelerated no-claims bonus, ie, giving you a year's no-claims bonus after ten months, such as Admiral's* Bonus Accelerator.

MSE's forumers have also suggested another tip. If you've previously been insured as an additional driver on, for example, your parents' policy, call up your insurer and ask if they'd be willing to take this into account for a no claims bonus. Some insurers do this, including Direct Line*. See the Great 'Young Drivers Insurance Savings' Hunt discussion for more tips and tricks.

If you have an accident, and damage someone else's car, but decide to cover the costs yourself, strictly speaking you should still tell your insurer about it.

Many don't, thinking it will increase premiums, yet a problem may arise if you have a second accident and it is found to be related to work undertaken for the first. If this does happen it would most likely result in non payment of the claim, rather than cancelling the insurance or being reported for fraud, but could still end up costing you £1000s.