Should the Budget turn your car insurance green?

British motorists were given their strongest incentive yet to think of the environment when they get behind the wheel thanks to a series of shake-ups that hit heavily polluting drivers where it hurts the most – in the wallet.

However, despite strongly pushing green cars the Chancellor failed to address some of the key cost barriers - particularly relating to car insurance. There are several green car insurance policies on the market but are they really competitive or are you better off sticking with a well-known car insurance provider and driving a conventional vehicle?

Chancellor offers green incentives but ignores car insurance

Certainly Alistair Darling played his part for the environment with a series of green motoring incentives – but he ignored the issue of car insurance.

Firstly he has introduced a shake-up of Vehicle Excise Duty (VED) which will be restructured from next year to increase the number of bands – with the highest polluting cars fitting into band M.

From 2010, cars emitting less than 150g per km will pay a lower rate, and those emitting less than 130g per km will pay no road tax at all. By contrast, new cars in band M will be slapped with a hefty £950 charge in the first year of ownership.

The Chancellor also made efforts to boost biofuels by scrapping the duty differential; and he promised to pour £40million into low-carbon vehicle development schemes. Indeed Mr Darling also tackled road congestion with additional funding for local authorities to develop their own charging schemes.

However, car insurance was not addressed. On average, consumers can pay £50 more to insure a green car compared to a vehicle of a similar size. This is due to a number of factors including a higher cost of repairs for hybrid vehicles.

How the Chancellor could help us think green with car insurance

According to research from Direct Line, 16% of drivers intending to buy a new car in 2008 will buy a 4x4 or a people carrier – despite the fact that these vehicles already register in the highest tax bands.

It seems that many drivers are put off by insurance premium tax which adds more weight to green car insurance premiums.

Generally, insurers take a positive view of green car drivers deeming them to be more socially responsible and generally less likely to use their car – therefore presenting less risk to the insurer.

However, taxation on green cars is leaving insurance costs high and has led one price comparison website to call on the Government to scrap the tax altogether.

Can going green save you money on car insurance?

Despite taxation, it is still possible for drivers of green cars to secure cheap car insurance – and potentially even cheaper than those who drive conventional vehicles as long as they are savvy.

The first step is to think about how you drive your vehicle. If you limit the amount of time you spend on the road, or avoid driving at certain hours of the day to reduce congestion, inform your insurer. Agreeing a mileage limit with your car insurance provider can significantly cut your premiums.

Cutting down the time you spend behind the wheel can also reduce your chances of being involved in an accident which in turn can keep insurance premiums low, especially if you’re building up a no-claims bonus.

For example, keeping your tyres at the correct pressure levels can improve your fuel efficiency – cars with tyres that are over-inflated or under-inflated by 6psi can use as much as 10 per cent more fuel.

Watch your speed too. Pollution is at its highest level up to 15mph and starts to rise again over 60mph. So, while you should always stick to the legal speed limit, driving between 50 and 60mph where possible will keep emissions down. Think about how you drive on the motorway too and leave a safe distance between you and the car in front – excessive braking and acceleration will also increase fuel consumption.

Consider green car insurance providers

There are now a number of green car insurance providers on the market including iBuyeco and CIS. These car insurance companies offer to offset your carbon emissions by supporting environmentally friendly schemes such as planting trees.

However, these companies may not necessarily offer the cheapest deals.

While it’s worth retrieving quotes from these providers, drivers should still shop around for cheap car insurance using a price comparison tool. Once you have found a car insurance policy offering the level of cover you need at the cheapest price, consider putting the money you save towards an environmental project of your choice.