Motorists are being warned not to skimp on car cover to avoid huge hikes in premiums when they renew.

Motor insurance premiums rose by a whopping 21 per cent in the second quarter of this year, compared to those in the same three months in 2022, according to the Association of British Insurers (ABI).

The rises are fuelled by increases in costs, with a recent EY report claiming insurers currently pay out £1.10 in claims and operating costs for every £1 they receive in premiums.

But The AA has highlighted how many of the essentials and budget policies available to reduce costs are removing key areas of cover such as windscreen protection, personal belonging and a courtesy car as standard. These omissions leave motorists forced to buy them as add- ons or fund any claim themselves.

Jack Cousens, head of roads policy at The AA, says: “The average cost of a windscreen replacement is £700 but it could be as high as £1,200 depending on the technology within the pane such as heating elements and rain sensors. We recommend motorists write a shopping list of the essential things they need covered by their policy and then shop around to find the right one.”

All policies will cover you for third- party claims should you damage someone else’s property. But you will only be covered for damage to your car if you have comprehensive cover. Third-party, fire and theft covers you only for fire and theft not damage after an accident to your car.

Basic policies are likely to exclude a courtesy car should yours be damaged, but some will let you add it for an extra premium. The same goes for personal possessions that are lost or damaged after a theft, for example.

Car key cover is another area that is often omitted.

Again, you may be able to add cover for an extra cost. Legal expenses cover is typically only available as an add- on to basic and cheaper policies.

Cousens also recommends checking levels of voluntary and compulsory excess — the amount of any claim you pay — which are often set at a high level and cannot be reduced.

In addition, you should check whether protecting any built up no- claims discount is covered or whether it is an additional cost, he says.

For example, Direct Line offers an Essentials policy that excludes its Fair Claims Commitment, which covers a no-claims discount “if the damage is caused by; potholes or poor road maintenance, theft from or of your car, being hit while parked, flood damage, if you hit or are hit by an animal, or hit by an object or debris”.

Other things to look out for include whether a new car will automatically be replaced with the same make and model if yours is written off in the first year or two, and whether you are allowed to drive other people’s cars, with their permission, under the policy.