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Guide to car insurance

The cost of keeping a car on the road has soared in recent years – just about everything from Vehicle Excise Duty (road tax) to fuel and maintenance has increased. Despite a recent fall in car insurance premiums, it is still more expensive now than in the past.

Car insurance is a legal requirement, designed to protect drivers and passengers on the road. In the event of an accident, it will cover the costs of damage or injury to the other party at the very least. However, it may offer more protection depending on the level of cover.

Why car insurance is a legal requirement

It’s imperative that anyone using a vehicle has adequate car insurance. ‘Using’ does not only apply when driving the vehicle, but also parking, leaving it unattended, or allowing another road user to drive it. The only time that insurance is not required is if a car has been declared ‘off the road’ with a Statutory off Road Notice (SORN).

Anyone driving without insurance is committing an offence, which can result in disqualification from driving, penalty points on a licence and a fixed penalty notice. However, the exact penalty will depend on the circumstances.

Different types of car insurance policies available?

Although car insurance is a legal requirement, there are three types of car insurance policies:

Third party; this is the minimum legal requirement and most basic level of cover. If you are at fault in an accident, this cover will pay out for the costs of damage or injury to the other party. With this cover, it’s important that the policyholder is able to cover the cost of repair or replacement of their vehicle.

Third party, fire & theft; this offers the same basic level of cover as third party, but also includes any loss or damage to the vehicle due to fire, and if the car is stolen.

Comprehensive; this maximum level of cover is also known as fully comprehensive. While it covers everything found in the more basic policies, as well as injury or damage to the policyholders, the exact cover can vary between providers.

Comprehensive cover tends to be the most popular choice because of the additional benefits; however, younger drivers might be able to get a cheaper policy by opting for third party due to the premiums being high as they have little experience. People with low value cars may also opt for a more basic level of cover. However, it’s worth comparing all three types of policy as in some cases, comprehensive works out cheaper in the long run.

Car insurance optional extras

When comparing car insurance policies, ensure that they are like-for-like, as what one insurer has as standard, another might charge extra. Comprehensive policies may sometimes include benefits, such as windscreen cover, courtesy car, legal expenses and breakdown cover. However, others will only offer them as add-ons.

In the event that optional extras do cost more, make sure they are added on at the best possible price. Compare standalone policies before including them into a car insurance policy. This way you are able to tailor the car insurance to your needs without having to pay for things you may not use.

Applying for car insurance cover

The most common way to apply for car insurance is online – there are often better deals available and it’s easier to compare prices. Motorists will need to provide information about themselves, such as name, address and occupation; their driving history, including any convictions and what the car will be used for; and finally the vehicle itself: make, model and age.

Another important part of the form is the ‘no claims bonus’. For every year policyholders have car insurance without making a claim, they receive one year ‘no claims’. New insurers will want to see evidence of no claims from the previous insurer, before they apply any discount.

While it might be tempting to lie on the application form to get a cheaper premium, it’s important to be honest as incorrect information will invalidate the insurance, which can be very troublesome when looking to claim.

Cost of car insurance

The cost of car insurance is always fluctuating due to claims, but it can still be very expensive for some drivers. The insurer considers all of the applicant’s details, with policies based on age, driving experience, type of vehicle, annual mileage, home address, criminal convictions and so on.

Young and new drivers often face the highest premiums, with some receiving quotes for thousands of pounds each year.

Although changing the level of cover can sometimes affect the price of a policy, there are some other ways to keep the cost down.

Insurance group: One of the biggest determining factors is the insurance group. There are 50 in total, with vehicles in the lower groups having cheaper premiums. Group allocation is decided by the risk of a particular car to the insurer. If policyholders are finding it difficult to reduce their premium, changing car is the next best option.

Increase the excess: With a comprehensive policy, most insurers will charge a compulsory excess – the amount the policyholder needs to pay before a claim can be made. However, it is possible to reduce the premium by increasing the amount of voluntary excess. With third party, fire & theft, and third party only, there is only a voluntary excess.

Adding a named driver: While ‘fronting’ is a criminal offence, there is nothing wrong with adding an experienced driver, such as a parent or spouse, as a named driver. Fronting is the name given to when motorists use an experienced driver as the main driver in order to cut the cost of premiums.

Making a claim: In the event that motorists are involved in an accident or incident, making a claim on car insurance should be fairly straightforward. Policyholders should contact their insurer with the details of the accident and both or all vehicles. It may then be necessary to take the vehicle to a garage in order to work out the cost of repairs. If the claim is being made on the third party’s insurance, the process may take a lot longer.