The Hidden Costs of "Free" Car Insurance: What Dealers Don't Tell You

Free 5 to 7 days insurance offers, meant to smooth the new car registration process, provided by car dealers come with significant hidden risks that could leave you thousands of pounds out of pocket and compromise your personal data privacy. Whether buying an electric or conventional vehicle, understanding these insurance pitfalls is essential for protecting yourself financially.

• Free, fully comprehensive dealer insurance policies often provide only basic coverage with significant limitations
• Personal belongings in your car may have severely restricted cover (as low as £100)
• Windscreens may not be covered, potentially costing £2,400 for electric (and ICE) vehicles
• No-claims discount protection is typically not included in free policies
• Free insurance terms often allow the insurer to share your data globally - the hidden permission is provided by you when you take out the free policy.
• Arranging insurance 21-23 days before delivery can save up to 40% on premiums
• Taking your own comprehensive insurance ensures proper coverage for your specific needs and maintains your no-claims-discount protection.

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Chapters

• 0:15 Introduction to insurance pitfalls
• 0:44 Why dealers offer free insurance
• 1:57 The Telegraph article revelation
• 4:00 Windscreen replacement costs explained
• 6:23 Data sharing concerns
• 8:06 Insurance timing tips
• 9:22 Closing remarks and book promotion

Transcript

Hi, this is Graham Hill, still making a ruckus. Most subjects included in my podcasts are specific to electric cars whilst a few apply equally to ICE cars as much as they do to electric cars. My next subject is one of those. Whether you intend buying an electric car or an ICE car this will make interesting listening. 

Now, as we've always learned in life, there's no such thing as a free lunch. There's always a price to pay, and that couldn't apply more to free insurance. So first of all why do the dealers offer you free insurance? They’ll explain that It makes life easier for the dealer, especially when it's a brand new car. You've got your new car on order and you're now coming up to the time when the car needs to be registered which requires an insurance covernote. Whilst the dealer may offer you free 5 or 7 day insurance I would certainly not recommend it. 

In my opinion I would suggest that you don’t take out the free insurance for a few reasons. Take out the insurance that you want through your own insurance company. Then you know that you have all the features included in the policy that you need. Because although the chance of you having an accident in those first five or seven days is very small it could happen. The chances are equally remote to winning the lottery but someone wins it each week. 

The dealer will explain that when you take out the free insurance, it makes life easier for the dealer because they have an arrangement with an insurance company such as Aviva. You're given their telephone number, you phone them up and give them all the details that have been given to you by the dealer along with your personal details and they, in turn, issue a cover note on the car. 

The insurance company has now got all your details. They issue the cover note for five to seven days. The cover note is emailed over to the dealer, they can now register the car and everything goes ahead very smoothly. It's a little bit of hassle for you to do it yourself through your own insurance company and then get them to issue the cover note by email to the dealer. It's not that much more complicated but and here's the big but, you will include everything you want to include in the insurance for those few days that may not be included in the free insurance policy.

A few years ago I had a call from the Telegraph. I get on with most of the national newspapers as I often provided them with stories and comments when asked. They mentioned that they had a slot coming up at the weekend that they wanted to fill with a car story. They asked if I had a brief article that I could give them on cars? I said that I could write something for them on free car insurance which they included. I pointed out that some of the free policies were very basic, just providing the least amount of cover.

This may mean that the contents of the car, if they get stolen, may not be covered or they may be limited to say £100 per claim. You may have a laptop or mobile phone that you leave in your car that gets stolen leaving you out of pocket if it costs over £1,000 to replace but the free cover has a £100 limit. There are one or two other things that you may not have covered. One that certainly won't be covered is your no claims discount protection that you may have on your own policy. So, if you have a claim in those first seven days whilst you've got the free insurance, you won't be able to carry the no-claims discount protection over. So even though you've had it for many, many years on your own insurance, you've now lost it because you've made a claim and you've not got the claim protection. So again, it's a reason why you would want to take the insurance out yourself and ignore the free insurance. 

Now, there was another interesting thing following my article in the Telegraph. One of their readers wrote into them and said – ‘That chap Graham Hill had it absolutely spot on’. He went on to explain what had happened to him. He picked up his new car. (I think it was a Jaguar, but don't hold me to that, sorry, jaguar, if I'm wrong. I'm pretty much 100% certain though that it was a Jaguar). Anyway, he picked the car up, drove it to the end of the road, a stone kicked up and cracked the windscreen. He returned to the dealership and explained what had happened asking the dealer to replace the screen as covered by the free insurance policy. 

The salesman explained that the windscreen was not covered by the insurance. The reader became annoyed and insisted on speaking to the dealer principal who, after a lengthy and heated discussion agreed that it was strange not to cover the glass and agreed to replace the windscreen. That's clearly ridiculous not to cover the glass which I believe cost about £1,400 at the time. If the reader hadn’t stood his ground he could have been £1,400 out of pocket as a result of taking out the free insurance. He agreed with the Telegraph that it was right to highlight this situation because when he checked the policy, there were a number of things that hadn’t been included that he had covered in his own policy. Things that you would probably want to have included as standard had you taken out the insurance yourself. So, taking out the free insurance is not a great idea. It might save you 5, 10 or even 20 pounds but is it really worth it? 

Now there’s another issue on this particular point of the replacement windscreen. Because if this was the case, as I've already told you in one of the earlier podcasts, replacement windscreens on electric cars are a lot more expensive, in fact six times more expensive than a standard windscreen fitted to ICE cars. Standard windscreens for ICE cars are about £400 pounds. However, the cost to replace an electric car windscreen, given the different material used along with more expensive fitting and sensor/camera recalibrations result in costs of about £2,400. That's a lot of money. And if you haven't got that covered by the insurance and the windscreen cracks during the free insurance period you could be in for a big bill. Another reason why you wouldn’t take the free insurance when buying a new electric car.

For the sake of clarity, in the event you’re buying a new ICE car before you commit to a new electric car, I should add that the cost to replace the windscreen on a newish ICE car would also be roughly the same as the windscreen for an electric car, certainly north of £2,000 as similar technology is now compulsory in all cars.

There’s another reason why I don’t recommend taking the free insurance. I was checking through various free insurance policies and I found that within the terms and conditions that by taking out the free insurance your data would be collected and could be shared with other partners. And then it went on to say other partners in EU countries and countries outside the EU, so pretty much the rest of the world. So, they could share your data with anybody in say China or Russia or anywhere they choose to share your data and no doubt being paid for it. 

They can share your data as a condition of taking out the free insurance so by signing the free insurance agreement you have given them the right to share your data with pretty much anyone they choose. So, there's two really good reasons for not taking out the free insurance. One, because you want to get the cover that covers everything you want to have covered if you have an accident, and on top of that, it's your data, and once you've taken out the free insurance, they've got carte blanche to share your data with just anybody they want to, and that's why you'll then start receiving loads of advertising into your inbox because they've now passed on your email address and other contact details. 

I'm not saying that they actually do that, but it's in the terms and conditions of the contract so they have the right to do it. So, before accepting what appears to be a very kind offer of free insurance, check the terms and conditions to see if the policy provides you with adequate cover. 

My recommendation is get well prepared in advance through your own insurance provider and start getting quotes between 21 and 23 days as previously advised. You need to organise your insurance and if you do that, then you can ask the insurance company or the broker, once you've got the registration number, to issue a covernote and email it to the supplying dealer. It really isn’t that difficult. Oh, and don’t forget that by fixing the premium between 21 and 23 days you could save up to 40% of the premium. Rather than sorting out the insurance after you take delivery of the car, at that point the insurers know that you’re over a barrel. You now need the insurance urgently.

By organising your cover rather than taking the free insurance you ensure that you are adequately covered for your needs. And don’t forget that whilst the cover you arrange yourself may include loss of personal items in the car automatically up to several thousands of pounds the free cover may not include this cover at all. And most important is the no claims discount protection cover. If you don’t have this included in the free insurance you lose that continuity and following a claim you could lose all of your accumulated no claims discount. 

The chances are that you won't have an accident and nothing will happen during the period of free insurance but that’s a risk you need to weigh up. Okay, that's another one. I think we are now coming towards the end of the insurance podcasts, but I've got one more subject at least that I want to tell you about, because I think it's a great product. So watch out for the next one. Some great advice. 

To finish off I'm Graham Hill and I’m the author of Electric Cars – The Truth Revealed. You can download a copy of this by visiting grahamhilltraining.com where you can buy it for just a few pounds. The current edition is going through a major re-write, likely to be available in early 2026 but if you pay for the current book you will be sent the updated version as soon as it’s available, completely free of charge. And if you want to pay for the upsell, which is the training course, also due out in 2026, then you're welcome to do that at a very low cost compared to what it will cost as a stand-alone training course, likely to cost hundreds of pounds. 

These initial podcasts are all to do with insurance as applied to electric cars. I'm not covering everything that will be included in the book in these podcasts but I’ll include the important issues that you may face transitioning into an electric car along with up-to-date news items. I've been Graham Hill and I’m still making a ruckus. Thanks for joining me, see you on the next one, bye for now.