Car insurance premiums are set to break through the £600 barrier for the first time next year as insurers pass on higher costs and with the further increase in Insurance Premium Tax (IPT) from 10% to 12% from June.
This means drivers, now typically paying around £50 a year to the Treasury when they insure their car, will see it rise to above £60. Some young drivers could have to pay more than £250 just in the IPT part of their premium, according to comparison site GoCompare.
IPT, levied on around 50m insurance policies (including car, home and medical), has gone up nearly five times since it was introduced in 1994 at a rate of 2.5%.
A representative from The AA says, “It’s disappointing the chancellor seems to have used the potential £40 saving on the average premium due to the whiplash crackdown, to increase IPT. The upward pressure on premiums continues, which coupled with the unwarranted hike in IPT will see premiums go through the £600 mark before any benefit from the whiplash crackdown takes effect.”
Advice on what can you do to keep your premium down?
- Don’t overbuy cover – if you only drive 5,000 miles a year, don’t insure for 10,000 miles.
- If you can park off the road on a driveway or private property do so and make sure your insurers are aware
- Think about adding a spouse or parent as a named driver – it could reduce the premium significantly
- Don’t jazz up your car with sports exhausts, spoilers, etc. as this can add to your insurance premium
- Drive carefully – the more no claims years you build up the better it will be for your wallet
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