Are short term car insurers ripping us off?

Is short term car insurance really overpriced? Many people have complained that the cost per day of insuring a car short-term is far higher than the cost per day of insuring it for a week but is this really a fair comparison?

So what is so special about short term car insurance?

It is insurance coverthat you can buy to drive a car temporarily for a short period - anything from a few hours to a few weeks. As an example you can apply for insurance for a car for just one day from and there are even other companies that can provide cover for a few hours.

It is even possible for people who are not UK residents to buy insurance in this way; temporary policies can be bought for drivers from countries such Canada, the EU, New Zealand and Australia from

How do premiums compare with those in the past?

It is not so long ago that insuring a car for just a few days was completely impossible or wildly expensive. It is only the coming of computerisation and the Internet that has made it at all economicaly feasible. From a small beginning only a few years ago with just a handful of insurers offering it there are now numerous insurance companies both large and small promoting this product which means that competition, particularly in a price sensitive medium like the Internet, is driving down premiums. Some of them being charged at the moment are so low that one disastrous accident could be very painful for some of these companies.

If it is all carried out online, then surely overheads are very low?

One of the major costs which insurers face is the expense of processing claims and, unfortunately, guarding against fraud. All this has to be done by human beings. This is usually the same whether the policy is a yearly one for which they have been paid several hundreds or even thousands of pounds, or a temporary one for a day or so which has cost a few tens of pounds. These costs have to be factored into the premium.

What if I want to insure someone else's car?

The majority of temporary car insurance companies allow motorists to insure cars that do not belong to them. However anyone who tried to do this with a mainstream yearly policy would probably have a shock; most insurers either refuse to accept this type of risk at all, or charge many times the normal premium for it. Since risk is the factor that premiums are based on it is perfectly reasonable to expect that policies such as the short-term ones for driving other people's cars with comprehensive cover will charge more. Yes it is reasonable to comment that many motorists have comprehensive policies that also allow them to drive vehicles that do not belong to them but this is inevitably with third-party cover only; the absolute minimum which the law will accept; and which does not cover any damage to the borrowed car.

Why do premium prices vary so much?

The majority of people who buy insurance only do so because the law tells them to. They ignore the benefits that they could receive from this insurance and concentrate on price only. In an effort to drive down the base price of a policy it is tempting for companies to cut back on benefits. There may for instance be legal cover included in a policy; but sometimes this is only available if the insurers feel that there is a good chance that legal action will be successful. Damage to a policyholder's own car may well be covered but repairs must often be carried out by an insurer's nominated repair shop rather than a main dealer which is likely to be more expensive. Loan of a courtesy car after an accident may be offered but there is usually a limit to how long this can be for, and the car is certainly not guaranteed to be of a similar standard to the damaged one. Furthermore different companies charge different excesses; there is a world of difference between one that charges say £100 excess and one that charges £500, but very often these figures are completely ignored by buyers.

The price of the policy is usually the only criteria that matters to many motorists and very few compare benefits in great detail. Sometimes though a more expensive policy can be an even bigger bargain if it offers better benefits.

What's the bottom line?

It is generally accepted that if you buy anything in bulk it is cheaper per unit than getting just one or two, and insurance is no different; buying 365 days of cover is cheaper per day than getting it for just a few days. The temporary car insurance market, like all other insurance markets, is now highly competitive so any company that tried to get away with charging rip-off prices would very soon be out of business.