Insurance Guides

Car insurance - the basics

By Garnet Roach

Whether you’ve just bought your first car or want to reduce your existing car insurance quote, there are a few things that you'll need to know in order to get the best deal. (16/02/10)

Car insurance is a legal requirement for all drivers, so if you're on the road, you'll have to get yourself covered.

Policy options

The first thing you need to think about is the type of insurance that you want; third party only - the minimum cover required by law, third party, fire and theft or fully comprehensive insurance.

The policy you choose will be based on a number of factors, including your budget and how much your car is worth - there might be little point taking out a costly, fully comprehensive policy on a car that’s not worth the annual fee.

On the other hand, if you’ve got a new car that you want to keep for a long time, full insurance would be a much better investment.

Different levels of cover will insure you and your car against different things:

Third party only - The minimum level of cover required by law in the UK. It offers:

Liability for injury to others (including passengers)
Damage to property
Liability whilst towing a caravan or trailer

Third party, fire and theft - Offers everything that third party only policies cover, plus:

Fire damage
The theft of your own vehicle
Damage to your car caused during the theft

Comprehensive - The most extensive cover available, covering everything that third party, fire and theft does, and usually:

Loss or damage to your vehicle
Windscreen cover
Personal effects
Accidental damage
Medical expenses

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Exclusions

No matter what level of cover you choose, you need to make sure that you read the small print and look for exclusions - especially if you're going for a cheap “stripped down” policy, which might not cover damage to windscreens, wheels or some personal effects.

Other exclusions might also apply, for example, you might not be covered to drive another car if you're under 25, and you won’t usually be allowed to race your car.

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Optional extras

There are a number of optional extras that are included in some policies, or excluded in others:

Legal protection
Breakdown cover
Courtesy car cover
Insurance abroad
Personal accident cover
Windscreen cover

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Are you already covered?

If you’ve bought a new car, you might already be covered - some dealers offer free insurance as part of their deals, so make sure that you're not paying for something you already have.

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Excess

There are two types of excess that you need to consider when choosing a policy; compulsory excess and voluntary excess.

Excess is the amount you will have to pay towards any claim you make. For example, if you have an accidental damage excess of £250 and you damage your car you will have to pay the first £250 towards the cost of any repairs. If the repairs cost £600, your insurer will pay out £350 and you will have to pay £250 - usually before you can take your car home from the garage.

Compulsory excess - Set by your insurer and will vary from one policy to the next, usually going up for young drivers or high-value cars.

Voluntary excess - This can be added in order to reduce your insurance premiums - if you agree to pay more towards any claims, you could reduce the overall cost of your insurance.

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No claims bonus

No claims bonuses are awarded to drivers who do not claim on their insurance policy, cutting the cost of your premium. The longer you go without making a claim, the more you stand to save on your policy, and if you do make a claim you could lose your bonus.

However, this applies even if the accident wasn’t your fault. Generally, there are a few rules that apply to no claims bonuses:

For every fault claim you make, you lose two year's bonus
Most insurers have a maximum no claims discount level, usually four or five years
You can often protect your bonus once you reach the maximum discount level, so that you do not lose your bonus if you have to make a claim

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Changing your policy

Make sure that you tell your insurer of any changes to your policy, such as a change of address or additional drive, as soon as possible - otherwise they may not pay out if you have to make a claim.

Some changes might also affect the cost of your insurance - if you move from a rural to an urban area for example, or to a new property that no longer has a garage.

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Switching car insurance

Switching is one of the easiest ways to make a saving on your car insurance. Make sure that you’ve compared car insurance policies to ensure that you get the best deal, and that you're free to switch from your existing insurer - otherwise you could face a charge if you cancel before your policy has expired.

A number of different things will affect your new policy quote, from your age and claims history to any driving convictions or medical conditions that mean you hold a restricted licence - but you do have to tell your insurer everything that could be relevant to your policy. Withholding information could mean that your insurer refuses to pay out when you have to make a claim.

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