CO2 emissions and their affects on car insurance

February 01, 2010

Here we look at the issue of green car insurance and why reducing harmful emissions goes hand in hand with car insurance savings.

How does green car insurance work?

A green car insurance policy should work in broadly the same way as a conventional car insurance policy in that it is designed to help drivers with the cost of accident related damages and injuries (subject to policy exclusions). There are normally three levels of cover to choose from – third party; third party, fire and theft; and comprehensive cover. As with any insurance policy, drivers should aim to find the level of cover they need at the right price.

Where green car insurance differs from a regular policy is that there are usually a number of environmental incentives available. Indeed with green cars and the environment becoming a growing focal point of the car industry, several car insurance companies market themselves around a green theme to target drivers who want to emphasise their environmental efforts.

Among the features offered by these companies, which include the likes of The Green Car Insurance Company and ibuyeco, are “carbon offsetting” programmes. This is where the insurance company assesses the amount of CO2 emitted by your vehicle over the course of 12 months by considering the vehicle’s engine size, its fuel type and your annual mileage. It then buys carbon credits from offsetting projects around the world – such as recycling schemes and tree planting projects – to compensate for the harmful emissions your vehicle churns out. Depending on the insurance company in question, it may offer a percentage of your premiums to these offsetting schemes or may even offset 100 per cent of your vehicle’s emissions.

There may be other green incentives available too – for example:

  • Some companies will dedicate a percentage of their premiums to eco-charities.
  • There may be discounts for driving vehicles with emissions below a certain level or alternative fuel cars such as those powered by electricity, hydrogen or biofuels.
  • Some companies are committed to using recycled parts (where possible) during their repair process.

So how does reducing CO2 relate to lowering car insurance premiums?

If a car insurance company is willing to offset 100 per cent of a vehicle’s emissions then you might think that it doesn’t matter whether you drive a high polluting vehicle – the company will still compensate for the pollution your vehicle emits.

However, the more money that is dedicated to offsetting schemes on your behalf, the higher your premiums are likely to be. What’s more is that there are a number of direct incentives to emit less CO2. These can include discounts for driving lower emission cars and bonuses for agreeing to a limited mileage.

In fact, most car insurance companies take into account your annual mileage when assessing your premiums – driving less reduces the likelihood of an accident and limits the CO2 your vehicle emits.

So should you choose a green car insurance policy?

Green car insurance certainly has its advantages, but you shouldn’t automatically assume these specialist insurers are the best choice for you.

It’s still important to compare policies both in terms of the level of cover available and the premiums you receive. You may find that a green car insurance policy doesn’t offer the protection you require or that it is notably more expensive than other forms of car insurance. That’s why you should compare quotes with a comparison website first to ensure you’re receiving value for money.

In theory, you could always choose the cheapest deal that sufficiently meets your needs and then put the money saved towards a green project of your own choosing. However, this would require a disciplined approach and you may find it easier to pay a little more for a deal with a green car insurance specialist.

Other ways to save and do your bit for the environment

There are other ways to save on car insurance while simultaneously doing your bit for the environment – here are some examples:

  • Agree to a mileage limit: As discussed, the fewer miles you drive, the cheaper your insurance should be.
  • Buy online: Buying on the internet saves insurance companies money due to reduce overheads and helps the environment too with less paperwork.
  • Drive safely: Considerate driving helps the environment – avoiding harsh gear changes, sudden braking and speeding, burns less fuel and reduces emissions. However, it can also help you save, as many insurance companies offer no-claims discounts if you stay claims free – this could be worth as much as 60 per cent off your premiums after four or more years.
  • Pay annually: Paying insurance premiums upfront can avoid monthly interest charges and reduce the number of paper statements you receive.