Car Insurance

MoneyHelper

After our homes, our cars are among the most expensive things we’ll buy in our lives – and it costs money to run, insure and fix them too.

That’s why we’ve put together some guidance on the different ways you can buy them, get help if you get into trouble with car finance, and how to cut the costs of running a vehicle.

Car Insurance

You’re legally obliged to have car insurance. Find out the best way to buy suitable car insurance, including the different types of cover available, how to use comparison sites, where to get help and some of the other things to think about when shopping around.

Why you need car insurance

Car insurance gives you financial protection in the event of an accident. And some types also cover claims arising from injuries to other people.

If you own a roadworthy car, you legally need at least a basic level of cover, called third party insurance, even if you don’t drive it.

The only exception is if you officially register your car as off the road, with a Statutory Off Road Notification (SORN).

Penalties for driving without insurance range from a fine and at least six points on your licence, to being disqualified from driving. You might also have your car taken off you.

The different types of car insurance

There are three levels of car insurance cover:

  • Fully comprehensive
  • Third party
  • Third party, fire and theft.

Fully comprehensive

This is the highest level of insurance you can have. It covers you, your car and any others involved in an accident.

It includes all the cover of a third party fire and theft policy, but also protects you as a driver and might pay out for damage to your car.

It might also include compensation for medical treatment, legal expenses and accidental damage.

You can claim for:

  • repairs after an accident
  • accidental damage
  • vandalism – for example, if someone deliberately scratches your car.

It might mean you can legally drive other people’s cars if you have their permission.

But this usually gives you no more than third party cover. This means you have no cover if you damage the car you’re driving. Check your policy details carefully on this – they’re all different.

It’s important to note that even though it offers the most cover, fully comprehensive isn’t necessarily the most expensive.

Third party

This is the minimum you can legally have.

It covers you for the costs of injury or damage you cause to other people or their property. But it doesn’t give you any protection if your own car is damaged or stolen.

Just because it’s the least amount of cover you can have, doesn’t mean it’s the cheapest.

So it might be suitable mainly for people who struggle to get affordable comprehensive insurance.

This might be when:

  • you don’t have a no-claims bonus
  • you live in an area that’s considered high-risk for crime and other risks
  • your car is worth less than, say, £1,000, and you can afford to buy another car if you have an accident.

Third party, fire and theft

As with third party insurance, this covers other people but it doesn’t protect you if your own car is damaged.

Where it differs is that it covers repairs or replacement if your car is stolen or damaged by fire. Again, it’s not necessarily cheaper than fully comprehensive cover – always compare prices.

No-claims bonus – what it is and how it works

This is the discount that insurers offer when you don’t claim on your policy. The discount increases with each year that you don’t make a claim.

It can be generous too – the discount typically ranges from 30% after one year to 65% or more after five years.

But if you have an accident and you claim for it, you generally lose two years’ worth of no claims bonus and your premiums go up.

If you have more than one accident in a year, you might lose all your no-claims bonus.

Even if you don’t make a claim, it’s important to tell your insurer about any accidents you’ve been involved in. Fail to do this, and any future claims might be rejected.

You can protect your no-claims bonus by paying for an add-on called ‘no-claims discount protection’. This means you can make claims without it affecting your bonus.

You’re usually allowed to make one claim in one year, or two claims in three years, without losing your no-claims bonus.

Excess – what it is and how it works

This is a fixed amount that you have to pay if you make a claim. The amount will vary, depending on the type of claim.

The compulsory level of excess is decided by the insurer. But you can also increase the voluntary excess to reduce the cost of your premium.

How to shop around – from comparison sites to insurance brokers

Take some time to research the market and compare quotes – and you should be rewarded with a better deal, this could mean cheaper prices, or more cover for your money.

This applies especially to:

  • younger drivers
  • people over 70
  • any other drivers that insurers might consider higher risk.

It can particularly pay to shop around at the first-year renewal. Simply letting your policy roll-over for another year could mean you pay higher premiums.

Your provider will get in touch three or four weeks before the renewal date, giving you a chance to decide if you want to stick with it or find a cheaper option.

Comparison sites

Comparison sites are usually the first place to find some quotes.

But try to use at least two different sites, as they don’t always use the same criteria or cover the same providers. Remember, cheapest is not necessarily best. Get the right cover or your policy won’t pay out when you need it.

Compare like for like – if you’re only looking for fully comprehensive deals, you can use the Defaqto comparison system.

What you need to tell your insurer

You need to give your insurance company accurate up-to-date details about yourself and your car. Failure to do this might result in your policy not being valid – and so no paying out on any claims. Plus, it might be harder and more expensive to get insurance in future.

Make sure you tell your insurer if you:

  • change address
  • use your vehicle for business
  • get points added to your licence
  • change your occupation or trade
  • modify your car – for example, you install alloy wheels
  • have an accident or have previously made a claim
  • change your alarm system or other security, or the place where you park your car.

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