Car insurance cutbacks 'could cost drivers dear'

08/06/2009

An epidemic of corner-cutting has sprang up among car insurance customers.

According to shock new figures from a financial website, one in five drivers who hold a car insurance policy are deliberately choosing a "reduced level" of cover due to cost concerns in the recession.

This could save customers money in the short term - but could leave them out of pocket if they suffer an accident and find themselves underinsured.

However, many were found by uSwitch.com to have been financially squeezed by trends within the insurance market - with comprehensive cover 11 per cent more expensive than the typical third party insurance deal.

Elsewhere in the poll, a severe lack of knowledge over various kinds of car insurance cover was revealed.

One in three motorists polled by the site said that they did not know what a third party policy covers - and what it does not.

"With over five 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," uSwitch.com said in a statement.

"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."

Kevin Still, EuroDebt director, added: "Some attempts to save money can prove to be a false economy and may in fact result in you breaking the law or having an insurance claim rejected. Being under insured on motor and home insurance are good examples of this, especially where your car may be vital to support your household income.

"EuroDebt routinely assess whether clients have dropped critical insurance cover, including life insurance, in order to meet monthly payments to unsecured creditors. Re-prioritising essential expenditure items when looking to establish a Debt Management Plan or IVA are very important to get a true and accurate picture of someone's financial position. We now look to ensure that the right level of cover is in place."

Tags; Budgeting Advice, Credit Card Lifestyle, Recent Graduate Debt,

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