Car things [Matthew's Journal]

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I took the car for its annual service and MOT today (which is going to be expensive, but such is life); since the garage is troublesome to reach on public transport (I'm not sure it can be done without at least two busses each way), I booked a courtesy car. All I'm going to use it for is to drive home having dropped the car off, and then back to collect it later (now tomorrow, as they have to get a part in). The chap at the garage seemed a little surprised when I turned down the £5.80 charge to waive the £500 excess on the insurance. It struck me that my expected crash-rate over the maybe 12 miles I'm going to drive this car for was far less than 1.16%, so the waiver charge was rather excessive. Maybe everyone else thinks "£5 for peace of mind" is a good deal...

[Poll #1140897]

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There are 33 comments on this entry. (Reply.)

The only case in which it's not bad value for the customer is if they actually wouldn't be able to find the £500 if they needed it.

Doesn't one's normal insurance cover it? Prob not. Grr. When we get routine work done, we don't book a courtesy car and so this does not arise. When we have on the odd occasion either booked such a car, or hired a car, we have paid the waiver as we prefer to pay £5 (less than 100 times over my/our lifetimes, I suspect) than find £500, whether I have it or not.

I sincerely hope however that when I get the courtesy car as part of my insurance deal next week (our car is to be fixed) then this will not apply.

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Normal insurance contracts I have known specifically exclude any vehicle that you're using on a commercial basis (hire cars, courtesy cars, etc): presumably so that the insurers can make more money.

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You can use your own insurance to cover a hire car or a courtesy car but there are a couple of pitfalls.

1) Usually garages want you to have fully comp cover if you're putting a courtesy car onto your own cover.

2) Your insurance company usually want to add a small premium to add another car to your policy temporarily (this isn't that unreasonable as people are more prone to having accidents in unfamiliar vehicles)

3) Usually neither the garage or hire company can tell you which vehicle you will be in before the day... but they will want a copy of the cover note providing cover for the vehicle from your insurer before they'll let you take the car away. So how much hassle that is depends on your insurance company, some used to get back to us within half an hour, some take up to 6 hours to supply a faxed copy of a cover note.

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Insurance, innit - you pay insurance if you can't afford to pay if things go wrong, or if you think you are more than averagely likely to have things go wrong. Given that we are poor enough that 500 UKP is a substantial chunk of our money still, and given we have many other expensive things around in a way that makes cash flow more of an issue than our lifetime wealth (eg house move, foreign holidays etc) I'd have paid the waver. Indeed, I did, last time. But I don't mind that you didn't.

Oh, and also I assume that my chances of making a Hidious Mistake in a hire car are greater than in my own car. Although I still hope not once every 1000 miles.

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Do you know whether 1 accident per 1000 miles is a dreadful overestimate? Because I can't find the relevant statistics online.

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I seem to be spending my life arguing about road traffic accident rates on LJ! That publication at least says there are 32 million cars, with 3 million claims on the insurance (but only 281,000 severe accidents per year, obviously cars crumple before people). Which is crazy-high (1 in 10 cars claim on their insurance in a year?) But still, I think average milage is about 10,000 so if it's a 10% chance of crashing in 10,000 miles, then, very crudely, it would be a 0.001% chance of crashing in 1 mile, making Emp's 10 mile journey carry a 0.01% chance of crashing - so the excess cover should be more like 5p than 5 pounds.

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Ah, right, that makes sense.

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I am probably an averagely skilled driver, and I would think an accident per 1000 miles dreadful. I had a car accident between 8 and 10 years ago when I neatly slid the car off the road on a bit of black ice, doing about £10 of damage. (Then the towing company did several hundred pounds worth of damage dragging it out over a concrete drain emplacement. No, we didn't have the energy to take them to court.)

Still, my annual driving has varied between 6000 and 12000 miles (more often over 10k), so that would be one accident in the last 72,000 miles, or perhaps much more - and I am sure that I am not the best driver around by a long chalk. The risk over a few tens of miles should, statistically, be too small to regard as a problem, UNLESS the loss of £500 would be a major disaster.

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I've rented quite a few cars, as it's our usual thing on holiday or for a large roadtrip, and we've used hire cars for a lot of inter-state trips, and the only time I did any damage was when there was a bad pothole in the middle of the road that bent the wheel rim when I failed to avoid it through not realising how deep it was. (This hire car travel includes things like driving down from Ohio to south Texas and back up via Oklahoma City, and random things like driving out from Las Vegas out to the California coast, and in England driving between Cambridge and Cornwall and Manchester.) So, at least for me, that is quite an overestimate. Then again, I probably drive over 20,000 miles per year, so I am used to driving. (In my own car, I've only had one accident, and that was a rather minor low-speed puzzling one; I've been driving for fifteen years now.)

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In cars I own, not hire cars, I realized I omitted mention of two accidents because I completely forgot about them because neither of them suggested anything to change about how I drive: they were both rather unlucky instances of me driving along quite unremarkably within my fairly straight lane at a sensible speed when a heavy thing took less than a second to go from being visible to hitting the side of my car rather hard. I think it goes to show that no amount of careful driving is going to guarantee freedom from accidents.

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I think it's a way to squeeze a bit more money out of you for, as you say, a relatively low probability chance of anything going wrong.

Saying that for a fiver I'd not want to take the risk for that £500 quid excess, which is an insane amount.

The general principle is never to insure against a risk you can bear. Given that insurance companies make a profit, insurance can't be good value for the customer if viewed as a straightforward bet that something will go wrong, its only value is in turning a small risk of a catastrophic loss into the certainty of a small loss.

As it is, the excess on my standard car insurance is £350, because a voluntary increase in the excess makes a significant saving in the premium.

Most garages would rather collect and return your car than lend you a courtesy car by the way. It's worth asking.

Really? I'd expect to be charged significantly for such a service! I'll try and remember to ask next time.

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I've had my car picked up for free a few times by my ex-nice local garage. (When the owner retired, the manager-cum-head-mechanic was not to my liking so we found new one).

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The general principle is never to insure against a risk you can bear.

I absolutely agree. And yet some people seem to think it's weird or foolish that I don't sign up to a direct debit to insure a £100 phone, and some people seem to be insured for every possible thing that could conceivably go wrong.

(Although, as Sally says, there's also a case for insuring if for some reason "you think you are more than averagely likely to have things go wrong".)

I love your icon btw :)

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Unfortunately, most insurers put in a clause along the lines of "if you think there's any reason why you're more than averagely likely to have things go wrong you have to tell us this so we can up the premium".

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Thankfully they don't seem to count "I'm the kind of person who loses/damages my phone", which is my reason for having had insurance on my expensive PDAphones for the past 8 years; I think I've claimed on it more years than I haven't, but they don't seem to be upping my premium.

Otherwise, I agree entirely with the point, and wouldn't pay a waiver like that.

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Me too. Although (in contrast to my post about credit card debt) conventional wisdom may have some points:

* if you *can* pay, but the hassle (financial or emotional) is out of proportion to the cost, you might prefer to make your cash flow predictable
* American health insurance seems to take it to an extreme, but the idea that you ought to be entitled to insurance, and indeed it's part of the system that insurance pays for predictable costs as well if you can get it (which always makes me disinclined, as I feel I'd probably be much worse at gaming the system, so surely it must be uneconomic for me; this applies less to hire cars where only random accidents (your fault or not) apply)
* if you think you are more likely to have an accident (this seems an obvious one, and would apply to me and bikes, but while it's perfectly reasonable to do, I just feel odd doing so; am i taking advantage (even if they are evil)? Does it make a difference if they know they're taking an average and some people are worse risks than others? Am I doing something wrong? I've become very careful how I leave my bike. What if occasionally you're not quite so careful, if you're always careless, does that void the contract, but if just once you tie up to a post that turns out to be crumbling, is that ok? But they can't tell the difference, would they fight it? Again, I feel like I just don't know the system and ought to find out.)

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That rather depends on what you mean by a risk you can bear.

I mean I have a big lump of savings from having sold my share of the house to Richard when I moved out. I could probably just not bother with contents insurance on the principle that if the house burns down I can afford to replace it all. But to be honest I'd much rather spend a 150 quid a year than risk losing all my savings.

I don't know if I'd pay a fiver in order not to risk a 500 quid payout. The point is currently moot since I can't hire a car until September anyway.

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My understanding is that if two parties have a bump, and the insurance companies can't tell who was really at fault (eg both drivers say it's the other's fault and no witnesses come forward), they both pay out. Which means that the insurance isn't just for the risk of *you* making a mistake, but also for someone else making one and blaming you.

At my garage the system is slightly different; they require fully comp insurance for courtesy cars, so if your own insurance covers that they're happy, or you can buy it from someone else, or buy it from them. I don't know whether it's easy to buy one day's fully comp insurance from anyone else - for a fiver I can't be bothered to find out. (My own insurance being fully comp for my own car but third party for anyone else's.)

Yes, this happened to me twice before I had amassed enough no claims to protect it for life, at GREAT expense over several years. In my own car...mistdog is right, it can happen in a hire car too. Or someone hits you who is uninsured themselves...

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I generally pay it, but that's in the context of hiring a car for driving a long distance where I have not only my own driving to consider but also the risk of idiots driving stupidly (especially on Welsh roads, where plenty of drivers seem to think they can see round corners).

How likely is someone to break into your car outside your house?

I'd pay the charge, because that's happened three times to me in the past five years.

Not very - and I've seen no sign of it having happened to anyone on our road since we moved here.</famous last words>

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I'd have paid it and it is good value provided you don't want to risk paying the £500 excess.

The number of times in 5 years working for a hire company that people said "Oh I'm only going a few miles I don't need the extra cover." only to find that the car was vandalised overnight or picked up a dent whilst parked at the supermarket for 10 minutes or had an uninsured Third Party hit them or just plain made a mistake because on their car the controls are laid out differently was huge.

And they all said the same things when returning the car.

"You're not going to charge me my excess for that little bit of damage are you?"

And we always had to tell them that yes we were.

The question in my mind was more how much that risk is worth. It seems to me that it's worth £5 if either a) I can't afford £500 right now or b) I expect in 100 car-hiring-incidents to damage the car (or have it damage for me) at least roughly once.

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Do I think it's a good value for someone? Depends on how that person maps money onto utility, and so on.

Would I do it? Well, at any given point either I don't have much money (e.g., now) and the $1k would be enough of a problem that I'd rather be safe, or I'd have more money and would pay the $11 because it'd be less than epsilon. Maybe. Come to think of it, I'm not really sure; it's hard to say without having the choice actually in front of me.

And, of course, I'm not a car user.

Though it depends. When hiring a car I always refuse the excess waiver. I have learned the hard way that vans are more likely to result in expensive damage, so I pay for the waiver when hiring those.

This meant my last van trip 'only' cost me 150 quid rather than approx 3 times as much when the paintwork was scratched.

I'd pay it. I didn't when I hired a car to go to Oxfrod last year, because I'd picked them as the cheapest hire-car place on the Interweb and I was aggrieved at them springing extras on me, but it greatly added to the stress of the journey. And then after I got back some fuckwit went down the road at 3am snapping everyone's wing mirrors off and I went feral. Fortunately mine was on the other side of the road, but I'd pay a fiver not to be vulnerable to large unbudgeted payouts due to fuckwits.

This is risk-aversion, not economics. Economically, you bear the risk if you can. Psychologically sometimes it's worth a fiver not to.

And then after I got back some fuckwit went down the road at 3am snapping everyone's wing mirrors off and I went feral.

Bastards. Yeah, *that*'s the problem. You have at least some control on the road. But there's nothing you can do about this. In theory, it's the vandal's fault, you ought to be able to recoup the money from him, but that's impossible. So the thing about the expected cost applies in theory, but it certainly feels like the insurance is necessary.

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www.insurance4carhire.com have annual policies for reducing the excess to zero. I've had a couple of policies with them whenever I've been doing more than a few days rental in a year, not had to claim yet however.
Might be worth looking into.

October