A Few Things I've Learned About Car Insurance    

If you thought that insuring your new car while selling your old car would be simple, think again - in my experience it can be anything but.

Here's the thing: I am about to buy a new (used) car. However I have yet to sell my old one. And although I am hoping to sell it quite quickly, there will be a short period of time that both vehicles will need car insurance.

Pretty straightforward, you might think; surely this happens to people all the time?

So first port of call: contact my insurer and let it know what's going on. It advised me that I could either transfer my insurance to the new vehicle, or take out a brand new policy on it (in which case I wouldn't be able to use my no-claims discount).

Transfer insurance to the new car

Transferring my insurance seemed sensible and so I asked how I could cover my old car temporarily. My insurer, however, replied that it couldn't help me with that one as it doesn't do temporary cover.

I was a bit flummoxed by this. I know that a lot of people simply trade-in their old car when buying a new one from a garage (thus making the insurance switch-over easy) but surely some people still sell their old cars privately? I can't be the only person to buy a car before selling an old one who doesn't want to take out a year's cover on both? But the answer here was that I could `possibly find some temporary insurance on the internet'.

I wasn't very impressed. So I tried a different tack: how about if I took out a separate policy elsewhere for the new car, and simply cancelled the old one when I sold the old car (and got my 5+ months of cover refunded)?

Firstly, it was pointed out that may not be the best option as I cannot use my no-claims discount on two cars at once. True. But, infuriatingly, I was told that the maximum rebate I would be entitled to anyway on my £200+ policy would be a measly £30!

Now I was seriously unimpressed. What happened to pro-rata rebates? So I decided to give a few other insurers a call to find out what they would offer their customers in a similar situation.

Other insurers can do it

Churchill and Norwich Union could switch over the existing insurance to the new car and provide temporary cover for the old car for 30 days (which could be extended). Admiral could switch the insurance over and arrange temporary cover for the old car on a weekly basis until it sold.

The temporary cover in each case would not, of course, be free, but it would probably have a lower excess attached to it than taking out separate temporary cover from an Internet company. And it could all be arranged for me through one insurer.

So why couldn't my insurer do this?

Well, it seems that a number of insurers simply aren't geared up for situations like this. You may be thinking that that is the price you pay for a cheap insurance policy, but this one wasn't that cheap . After using a price comparison tool, I'd picked this one (and paid slightly more than my cheapest quote) as the insurance has the prestigious five-star Defaqto rating.

Defaqto rating

So what is the Defaqto rating? Well, in a nutshell, Defaqto is an independent company that analyses the quality of financial products (insurance, credit cards, mortgages etc) and rates them according to its star system. Where motor insurance is concerned, it assesses the quality of the features and benefits offered by the policies and rates them accordingly.

I gave Defaqto a quick ring to find out just how it carries out its assessments. Although it couldn't reveal too much, it did explain that, to earn a five-star rating, a product must exhibit `high levels of cover over a wide range of benefits'. A five-star policy will offer more features and benefits than one with four stars. Criteria include courtesy cars, personal belongings, audio and satellite navigation equipment, and loss and theft of keys, amongst others.

With toddler car seats, for example, some insurers will pay out a set sum (say £200 or £300) following an accident, should they be damaged. Others will simply replace them after an accident, whether they are damaged or not. And it's those features and benefits that go above and beyond your standard cover that increase the star rating of a product.

Unfortunately, the assessment does not take into account the underwriting of policies (that is, the assessment of whether insurance will be given, or continue to be given), and so has little relevance to my issue of providing flexible cover.

Anyway, I've decided the best thing to do is to switch my cover to my new car, and find some temporary cover for my old one (and sell it as quickly as I can).

So what have I learned? Well, to paraphrase Warren Buffett:

First rule: Always read the small print before taking out any type of insurance policy to ensure it meets your needs.

Second rule: Don't forget the first rule.

Finally, don't follow a star rating system blindly no matter how prestigious it is. And if you're wondering who my insurer is, well let's just say maybe their ready meals are easier to swallow than some of their insurance terms.

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