Motorists forced to opt for lower level cover

Over a million UK motorists are opting for a reduced third party level of cover in a desperate bid to keep their vehicles on the road in the current economic climate, according to research from uSwitch.com.

One in five (20%) third party policy holders, admitted that they are now unable to foot the bill for a fully comprehensive level of cover, and a further 6% (304,000 drivers) have recently downgraded from this more sophisticated level of insurance to save money on the cost of running their car. In addition, 3% (152,000) of these motorists no longer even bother to compare fully comprehensive quotes and instead opt for a downgraded level of cover straightaway.

The research also reveals a worrying lack of knowledge, with over a third (34%) of motorists oblivious as to what a third party policy actually offers in terms of cover. Of these drivers, 7% (1.8 million) wrongly believe that a third party policy covers them for damage to their own vehicle but not for damage caused to other vehicles involved, a further 7% (1.8 million) believe that they are protected for both damage caused to their own vehicle as well as any other vehicles involved, and a further 20% (5 million) of motorists simply admitted they did not know.

With over 5 million motorists currently holding a third party policy, this failure to get to grips with what is and isn't covered could leave many motorists in a real roadside quandary and, what's more, with a significant financial headache. If they were involved in an accident, only the damage caused to other vehicles, and not their own, would be covered by a Third Party policy.

Across the industry, a comprehensive policy is, on average, 11% more expensive than third party. However, although younger motorists suffer much higher premiums than their more mature driving counterparts, this price difference diminishes to just 7% for the 18 year old age group. Interestingly, in the case of Direct Line, an 18 year old driver's premium for a fully comprehensive policy can, in fact, work out at 6% (£116) cheaper than a third party equivalent policy, due to the providers' particular method of risk assessment.

With many motorists struggling to find the cash to foot the bill for their car insurance premium, it's not all doom and gloom. Building up a no claims discount on both third party and fully comprehensive polices can translate to a significant reduction in price at the point of renewal. A twenty-five year old driver can see their third party premium drop from £747.40 to £693.99 (7% reduction) if they have built up a one year NCD, and to just £445.63 (a massive 40% decrease) if they build up a five year NCD. Similarly, a 40 year old driver with a fully comprehensive policy can see their premium drop from £514.65 to £481.45 (6% reduction) if they have built up a one year NCD, and to just £288.37 (a 44% decrease) if they build up a five year NCD.

As a young driver, building up a no claims in the early years of driving can also have a significant impact on the amount you pay for your policy. An 18 year old driver who builds up a one year NCD in the first year of driving can see the price of a third party policy reduce from £2,603.37 to £1,471.75 (a 43% decrease) and the cost of fully comprehensive insurance fall from £4,781.97 to £1569.99 (a 44% decrease).

Mark Monteiro, insurance expert at uSwitch.com comments: "In the current climate, it is unsurprising that motorists are looking for ways to ease the cost burden associated with keeping a car on the road. Yet motorists must be careful that downgrading their level of car insurance cover doesn't turn out to be one cut-corner too many. There is no doubt that opting for a Third Party or Third Party Fire and Theft level of cover, in most instances, works out to be cheaper and can be perfectly adequate, particularly for newer drivers with no insurance history or those motorists whose vehicles have a low value for whom a comprehensive policy may be more expensive than the vehicle itself.

"However, for those motorists who don't fit into this bracket, a third party level of cover could prove a false economy in the event of an accident, as a motorist is in danger of having the amount saved on the premium completely wiped out by the cost of any repairs to their vehicle. When considering a less sophisticated level of car insurance, motorists need to assess the risk of funding a replacement car against the value of the saving to be made by not opting for comparative comprehensive cover. Drivers should also weigh this up alongside their personal driving record and the likelihood of making a claim before making a final decision."