Victim of redundancy? Car insurance could cost you more

As the recession begins to hit home, figures from the Office for National Statistics (ONS) show that 225,000 more people became victims of redundancy at the end of 2008 -bringing total unemployment in the UK to a staggering 1.92 million.

New research from uSwitch.com reveals that these consumers are not only losing their monthly salary but they will also be financially penalised by their car insurance provider as a change in employment status can cause renewal premiums to rocket. In fact, changing occupational status to ‘unemployed' can bump up the price of insurance by an average of £137.77 or 20%.

uSwitch.com calculates that these premium hikes are set to cost the latest victims of redundancy a total of £16.4 million extra for car insurance in the next year alone. With unemployment figures set to grow by 1,644 per day this year, more and more drivers could end up paying inflated insurance premiums on top of the tragedy of losing their job.

Ashton Berkhauer, insurance expert at uSwitch.com, says: "The threat of redundancy will become a painful reality in the coming year for many UK workers, sending their finances into freefall. Adding insult to injury, the newly unemployed will find themselves having to fund a radical increase to their car insurance premiums of almost 20% on average, even if they have maintained an impeccable driving record in the past. With many providers' advertising campaigns promoting a 10% reduction in various guises when renewing car insurance, any savings an unemployed driver would make would be completely wiped out."

Berkhauer concludes: "For peace of mind, those motorists nervous about what the future may hold on the job front, should contact their provider to discuss the potential impact on their premiums. It is advisable for all motorists to shop around when renewing their car insurance to ensure that they are getting the most competitive deal. Making savings in the short term could make all the difference as no one can be certain when that rainy day will arrive."

Premiums are dictated by the risk profile of the driver, and providers make the assumption that an unemployed driver will spend more time driving as they no longer have the routine of a regular commute. Drivers do not have to inform their insurer in the event that they become unemployed until the point of renewal, but failure to do so could result in a motorist invalidating their policy.