Understanding Car Insurance

If you drive a car in the UK then you’ll require insurance. All drivers, including new drivers on a provisional license, are legally obliged to tax their car and insure it. There are loads of providers of car insurance available to choose from and it is wise to shop around to check you’re getting the best price.

Types of Car Insurance

There are 3 types of car insurance available:

Third party only:

This is the most basic level of car insurance. If you have an accident with another car then your insurance company will pay for the other drivers car to be repaired but not your own.

Third party, fire & theft:

The same as above but covers your vehicle if it is stolen or is set alight.

Comprehensive insurance:

This covers everyone involved in any crash with your car. It will cover the cost of your car repairs, any other cars involved and usually will cover injuries to other drivers as well.

Comprehensive car insurance can include legal cover, breakdown cover, windscreen cover and can also cover a courtesy car so you can still drive while your car is repaired.

Buying Car Insurance

When buying car insurance it’s often worth getting multiple quotes from various sources.

Using a website is a quick and easy way to get a starting price but you can also phone up and ask the actual insurance company to check if there is a better price available.

Price comparison sites are often worth a look too but when you’re sent to the website of the insurer you should carefully check the details and assumptions that have been included in your quote before signing for the insurance policy.

Car insurance can usually be paid for monthly or annually.

Varying Prices of Insurance

Insurers play a game of risk with all drivers. They calculate how much of a risk a driver poses, or more importantly how likely it is that they are going to have to pay out.

Based on statistics and data collected over many years they will usually come to the conclusion that younger drivers, or drivers with no experience will be a higher risk than a middle aged driver who has been driving for 20 years. Based on that risk the price of insurance will be considerably higher for an 18 year old man who’s just passed his test and wants to insure a Subaru Impreza compared to a 40 year old lady who’s driven safely for 20 years and is insuring a Vauxhall Corsa.

Car Insurance Policy Excess

Another thing to check is the policy excess. An excess is an amount of money you have to pay towards the cost of any repair.

You can opt to have a higher excess to bring down the cost of your insurance policy but it will mean that each time you claim you will have to pay the excess amount before any claim is settled. For example: You have a policy excess of £150 and then you have a crash. If the repair bill is £3000 then you’ll be asked for the first £150.

Car Insurance Documents

When you have chosen your insurance policy you’ll get a very detailed policy booklet detailing what’s included with your insurance. You’ll also get a cover note or certificate of insurance. This is just a basic document that proves you’re insured and the name of the company. You should keep a photocopy of this in your car so that if you have an accident you can quickly provide the other driver with your insurer’s details.

No Claims Discount

For every year that you drive a car but don’t need to make a claim from your insurance provider they will reward you by adding a no claims bonus or discount. So if you drive for 5 years without claiming you will earn 5 years no claims discount. This means that when you’re shopping for a renewal you will get a discount on your policy because of the number of years you’ve been claim free. You’re deemed as a safer driver and therefore you should pay less for insurance as there is less risk to the insurer.

No claims discounts are transferable between insurers so remember to keep hold of evidence of your bonus.

DVLA Penalty Points

If you have any convictions for any motoring offence then the court or the police can endorse your drivers license with penalty points. Usually you will be banned from driving if you reach 12 penalty points in a 3 year period (newly qualified drivers have different rules).

If you have any penalty points on your license then you must declare them to your insurer at the time you take out the policy or during the year if you’ve already paid for your insurance. Failure to do so could invalidate your car insurance and make it null and void.

Depending on the offence your points will stay on your license for between 4 and 11 years.