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.

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.

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.

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.

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.

10 ways to lower your risk and keep costs down

Make your car more secure

Making it as hard as possible for someone to steal your car reduces the risk and, in the process, is likely to reduce the insurance cost too. You can make your car secure by:

• checking with your insurer what security devices it offers discounts for
• fitting an approved alarm or immobiliser
• parking in a garage or driveway if possible
• using Thatcham-approved security devices.

Drive a make and model from a low insurance group

Every car is allocated to a particular insurance grouping. This is based on factors such as cost, how long it takes to repair, performance and safety and security features. The lower the group it’s in, the lower the premiums.

Be accurate with your mileage

The lower your annual mileage, the lower your premium might be. But this isn’t always the case. So don’t underestimate your mileage, as this might invalidate your insurance when making a claim or cause you to miss out on a better deal.

Drive safely

Some insurers will give you a discount if you have taken a Pass Plus or advanced driving course. If you’re a careful driver, you might benefit from getting a policy that uses telematics – ‘black box’ technology – to assess the quality of your driving. Be aware that any insurance claims or points on your licence will increase your premium.

Add a second driver

Adding a second, low-risk driver can reduce the premium – even if they don’t use the vehicle much. While adding a newly qualified young driver will increase the premium. But don’t break the law and invalidate any claims by pretending the second driver is the main driver.

Pay for your car insurance annually

Insurers will sometimes charge interest if you pay by monthly instalments. If you can afford to pay upfront, you’ll save a significant amount over the year.

Don’t pay for what you don’t need

Check what cover you have under other financial products. For example, some current account packages include car breakdown cover.

Sometimes your insurer or broker might try to sell you add-ons, such as legal expenses cover. You might be able to get these products more cheaply elsewhere, or you might not need them at all.

Considering buying breakdown cover separately

If breakdown cover is included in your car insurance, check the price and the level of cover. You might find better cover for the same price or less elsewhere.

Protect or increase your no-claims bonus

You earn a no-claims bonus for each year you drive without making a claim on your insurance. Make sure you can carry this over when changing insurers. If you haven’t claimed for five years or more, it might be worth paying an extra premium to protect your no-claims bonus.

Consider adding a voluntary excess to your car insurance

By adding a voluntary excess to your compulsory excess, you can lower your premium. Be aware that you’ll get less back if you make a claim – after both voluntary and compulsory excesses have been deducted. So you need to be able to afford it.

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.