Car insurance offers financial protection in case of an incident involving your car. As with most types of insurance, the insurer collects premiums (the monthly or annual payment you make) from its customers, which creates the necessary fund from which to payout to customers on making a claim.
What determines the premium?
When you take out car insurance, the insurer needs to assess the risk of you making a claim. This should ensure they have sufficient funds in total to pay out claims and ensure they are profitable. It's quite a scientific process. The factors include:
• The car you drive – which affects your premium based on the cost to repair it,
how secure it is and what your car tells the insurer(generally) about the owner
– such as performance.
• How many miles you drive each year – the more miles you drive, the more
chance there is an accident
• Where you live – cars kept in certain areas are more likely to encounter theft or
vandalism than others
• Your occupation – even if you are a careful, considerate driver, other people who
do the same job as you may, on average, be less so than the population in
general
• Your age – younger people are more likely to be involved in accidents
• Your claims history – partly to recover some of your previous costs but also
because past behaviour may be an indicator of future behaviour
• Whether your car has an alarm or immobiliser
• Where you store your car at night.
All of these factors, when put together, determine whether a particular company will cover you and the cost of the premium.
What does car insurance cover?
The level of cover will depend on the type of policy you take out. There are a range of policies available – from very basic policies only covering the legal minimum, to comprehensive policies which cover you for most, if not all, eventualities.
Generally, the more cover a policy offers, the more expensive it is. It's up to you to decide how much cover you'd like so that you can choose the most suitable policy for your needs and budget.
Third-Party Insurance
Third-party insurance is the lowest level of insurance you need by law. Usually, like for like, third party only insurance is the cheapest option as it offers the least protection of all the types of cover available.
Third-party insurance typically covers:
• Damage to another car
• Injury caused to others
• Injury to your passengers during an accident
Third-party insurance doesn't cover:
• You
• Your car
Third-party, fire and theft insurance
Third-party, fire and theft insurance covers everything a third-party car insurance policy does and protects against fire and theft.
Third-party, fire and theft insurance typically covers:
• Damage to someone else's car or property
• Injury you may cause to others
• Injury to your passengers during an accident
• Fire damage
• Theft (and possibly damage caused by attempted theft)
Third-party, fire and theft insurance doesn't cover:
• You
• Your car (except for fire damage and theft)
This type of car insurance won't cover your car for accidental damage.
Fully Comprehensive
Fully comprehensive car insurance offers the highest level of cover available. If you have a new or expensive car or often travel with costly to replace items, this could be the type of policy for you.
Fully comprehensive insurance usually covers:
• Damage to someone else's car or property
• Injury you may cause to others
• Injury to your passengers during an accident
• Fire damage
• Theft (and possibly damage caused by attempted theft)
• Chips and scratches
• Vandalism
• Accidental damage to your car
The exact level of cover will depend on the policy you choose, so you should always read the policy details to ensure you select the best cover to suit your needs.
What is an excess?
In insurance terms, an excess is the first amount of any claim that you have to pay. The amount of excess you pay should be clear to you when you take out any insurance policy, and you can often select the excess amount when getting a quote to vary slightly the premium offered.
For example, if you have a policy excess of £100 and your car is damaged in an accident, you'll pay £100 towards the claim.
What about No Claim Discounts?
Insurers offer their policyholders a percentage discount for not making a claim. This is commonly known as a No Claim Discount or No Claim Bonus. The more years' No Claim Discount you have, the larger discount you're offered on your car insurance policy. The amount of discount you're offered varies between insurers.
Not all claims affect your No Claim Discount. Many insurers wouldn't reduce your No Claim Discount if your claim wasn't a 'fault' claim, for example.
Some car insurance providers offer you the option to protect your NCD but most charge an additional fee for this.
Driving other cars on my insurance?
Although some Comprehensive car insurance providers may include Driving Other Cars (DOC) cover, it doesn't always come as standard. If you need this, check before selecting the policy on offer.
Windscreen cover
Comprehensive car insurance policies often include windscreen/glass cover. This means that should your windscreen be damaged, you can get it repaired or replaced.
Driving abroad
The rules for driving on much of the Continent have changed a little since the UK left the EU on 1 January 2021 and carrying a green card as proof that you have car insurance is now a requirement in many European countries. This is an internationally recognised document of proof that you have car insurance.
You must show the green card if you are involved in an accident, and you may be asked to produce it at borders between countries or by the police.
Your insurance company either send you a green card through the post or advise you how to download a copy that you can print yourself.
