Hidden Costs of Car Insurance

In the process of budgeting? For those of us who drive, car insurance can be an essential expense to factor into your monthly outgoings. But this is a cost which might be more than it initially seems. That's because there are many potential extra fees which are included with car insurance, and in this article, we take a look at them...

In This Guide:

• Types of fees
• APR
• Types of add-ons
• What else affects car insurance premiums?
• How can I get cheap car insurance?

Types of fees

There are several car insurance fees which you could encounter in addition to the premiums which you pay periodically.

Renewal fees are certainly not charged by all car insurance providers, but that doesn't mean you shouldn't watch out for them. Some providers, including those online, require you to pay a fee to renew your car insurance policy. This is not typically a large sum.

Cancellation fees refer to an amount which is charged should you sign up for a policy, but then decide you no longer want it. This isn't usually a huge amount, but it should be noted that the amount, and the provider's policy with regards to a cancellation fee, can vary from provider to provider. Some providers might have a 'cooling-off' period which allows you to cancel the policy within a certain time frame, but still charge a cancellation fee if you choose to do so.

Adjustment fees are a charge which is applied when you make changes to your policy. These could include adding a second driver or changing the name on the policy. They are paid on top of any increase to your premium which the change may cause.

APR

Those who pay for their car insurance monthly are likely to pay an annual percentage rate (APR) on top of the basic cost of the policy. This is, in effect, taking out a loan from your car insurance provider. These costs are usually well publicised, but be aware that when you pay monthly, you typically pay more.

Types of add-ons

We aren't done yet, because there are many types of add ons which can bump up the cost of your car insurance premiums.

Breakdown cover ensures that you can receive financial support for recovery and roadside assistance in the event that your vehicle breaks down. The two main types of breakdown cover are:

• Vehicle cover - applies to one specific vehicle;
• Personal cover - covers a specific individual irrespective of which vehicle they are travelling in.

Personal accident cover provides compensation to policyholders in the event of them, or their partner, being injured or killed as a result of a car accident. While some degree of personal accident cover is typically included in a car insurance policy, you should ensure that you have the level of cover which you require.

Key cover will typically cover you for locksmith charges in the event that you lose your keys or need to have a new lock fitted. In some cases, it can include the cost of reprogramming electronic locking systems, temporary vehicle hire, and offer a helpline for incidents related to key loss.