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Car insurance guide

Car insurance guide

Category: Insurance
Author: Tim Leonard
Updated: 28/03/2018

Car insurance is a legal requirement in the UK.

The minimum level of cover you should have is Third Party Car Insurance, although you would have more extensive cover through a Fully Comprehensive policy.

It's also a legal requirement to insure cars that aren't driven, or get them issued with a Statutory Off Road Notification (SORN).

The three types of car insurance

What it covers... Car insurance type
Third Party Third Party Fire and Theft Fully Comprehensive
Costs of repair if you damage another person's car or property Tick Tick Tick
Costs arising from injury caused to other people Tick Tick Tick
Costs of repairing or replacing your vehicle if it is vandalised, stolen or catches fire
Cross Tick Tick
Being hit by an uninsured driver (although you may lose some, or all, of your no claims discount)
Cross Cross Tick
Costs of repairing or replacing your vehicle, even if the accident was your fault
Cross Cross Tick
Costs arising from injury caused to you, even if the accident was your fault
Cross Cross Cross

Fully Comprehensive car insurance is traditionally the most expensive type of cover, but gives the most protection. Third Party gives basic cover and is usually cheaper. However, this isn't always the case – in some instances it can be the same price or even cheaper to go Fully Comprehensive!

Think carefully about the level of cover you need and don't be swayed by price. If you had an accident, could you afford to foot your repair bill, or buy a new car completely?

Also consider what you would claim for. Would you want to claim if you wrote off your old Fiat Panda worth a few hundred pounds? Probably not. In that case you might be happy with Third Party car insurance.

But you probably would want to claim if you wrote off your new Ferrari, so in this case Fully Comprehensive cover might be more appropriate. It's all down to your individual circumstances.

Shop around – compare car insurance policies

As with all things, shopping around is always the best idea. Compare car insurance quotes to see if you can lower your premiums or get a better level of cover for your money.

Every car insurance quote will differ depending on your age, experience, where you live, occupation (dependent on the risk of your role) and the provider from which you buy the car insurance.

Be straight with your car insurer when making an application. Telling a couple of porkies now to save a few pounds might seem innocent enough, but it could invalidate a claim later. And if your circumstances change, such as your job title, it's advisable to tell your insurance company immediately, as this could affect your premium and any future claim. Just remember, the purpose of having motor insurance is to pay out if you need to make a claim, so honesty is always the best policy.

Car insurance – excess amount

The car insurance excess is the amount that you would need to pay in the event of a claim. Remember that smaller claims may not be worth making as you'd lose your no claims bonus (see below).

The higher you set your car insurance excess, the cheaper it will make your premium.

Your insurance company may also apply a compulsory excess in addition to any voluntary excess you enter.

Set the excess at an amount you would be able to easily afford, otherwise you could find it quite a challenge to come up with enough money in the event of a claim.

No claims discounts or bonuses

No claims discounts or bonuses can seriously reduce the amount you pay for your car insurance. No claims can be earned on all types of car insurance policies.

Think twice before making a smaller claim on your car insurance as you may lose some or all of your no claims bonus. This would make your insurance premium go up the following year, so weigh up whether a short-term hit to your finances will actually save you money in the longer term before making a claim. Read more about no claims discounts.

Optional extras

Car insurance providers may offer a number of optional extras that you can bolt on to your policy. These can be very useful but remember they will add to your premium.

  • Protected no claims discount

If you have earned a full no claims discount (typically a period of five years without a claim) you can opt to protect this. Protected no claims can be a really valuable extra as your no claims discount can save hundreds of pounds every year on your car insurance premiums.

  • Legal expenses cover

You can be insured for the costs of taking a case to court if you need to recover any expenses after being hit by an uninsured driver, or other uninsured losses (such as your excess). This can also include cover for loss of earnings and legal advice.

  • Breakdown cover

Roadside assistance may be offered.

Careful when shopping for car insurance online!

Comparing car insurance online is easy and convenient. But make sure the policies you are comparing are what you want.

Comparison sites may well make assumptions about your cover, such as setting a voluntary excess at an assumed amount. If you want a higher or lower excess it will affect the amount you pay, so look at the policies carefully before deciding which one is right for you.

Watch out for hidden charges

Car insurers can charge a small fortune for changing details on a policy later on (such as adding a named driver). If you know you might need to change details later when you take the policy out, make sure you check the charges you will have to pay.

What next?

Find a great deal on your car insurance by comparing over 100 car insurance providers

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.