Car Insurance

A Comprehensive Guide to UK Car Insurance
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Introduction to Car Insurance

We get lots of enquiries from people, particularly those who’ve just passed their driving test, who want to fully understand how car insurance works in the UK and what type of cover would best suit their circumstances.

The good news is that the advisors we work with are experts when it comes to car insurance, no matter what your age and, having access to the whole market, including those you won’t find on cost comparison websites, they can find you the best deals.

To answer some of your questions we’ve put together this comprehensive guide to car insurance where we will cover:

What is car insurance?

Car insurance is financial protection against accidents, acts of vandalism, theft and damage to your vehicle caused by fire. It also provides protection if you cause any harm to other members of the public or their property. 

In the UK it is against the law to drive on the roads without car insurance. Failure to have an active car insurance policy in place could result in a fine of up to £1,000 and 6 penalty points on your licence. You could also have your vehicle seized and destroyed if you drive on the roads without it. 

Most car insurance providers offer either monthly or annual premium payment plans. Policies are then renewed on an annual basis allowing you or your insurance broker to review the market and find the most competitive deals

What is an excess?

An excess is a financial contribution a policyholder must make towards an insurance claim. The excess you pay remains the same, regardless of the size or number of claims you make, throughout the life of your policy. 

The excess amount will differ depending on the type of claim. For example, an excess for a replacement windscreen will be different from an excess for accidental damage. 

Excesses are typically compulsory (set by the insurer) or excess (agreed as an additional contribution by the insured driver). Usually, insurance premiums are higher for policies with low or a zero voluntary excess. The higher the excess, the lower the premium. 

It is possible to purchase insurance that protects the driver against the cost of the excess. This is called “excess protect” and drivers might consider asking their broker to quote for this as it can be very valuable in the event of a claim for often a very modest premium.

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What is a no claims bonus and how does it work?

No claims bonuses are a reward to drivers from insurers for safe, careful driving and for avoiding making any claims on their insurance policy. A no claims bonus reduces the amount of your insurance premium and grows every year, providing the insured driver has no claims.

The amount of bonus will vary from lender to lender, but typically you should expect a no claims discount (NCD) of 30% after one year, growing to as much as 65% for five years of no claims on your policy. 

Drivers should be aware that their valuable no claims bonus can be affected by both fault and non-fault claims. Most insurers will only take the last 5 years of no claims bonus into account when adjusting their premium.

It may be possible to protect your no claims bonus, however, drivers should check with their insurer. 

What types of car insurance are available in the UK?

In the UK there are three types of car insurance offering different levels of cover:

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

Third party

The minimum level of cover required by law is third party. 

This level of cover is the most basic available and covers the financial cost of any damage caused to any third party property and compensation for any personal injuries resulting from an incident which was deemed to be the fault of the insured driver.  

For example, if you are driving a car and cause an accident which damages another vehicle, the driver, their passengers and any passengers with you, a third party policy would cover the costs incurred. 

The only person not covered by a third party policy would be yourself as the driver. It also would not cover the cost of repairing your vehicle in the event of a crash where you were at fault. 

Third party, fire and theft

In addition to third party protection, this level of cover will also cover the costs resulting from loss or damage of your own car as a result of either fire or if it is stolen. It will not cover you if the car is damaged as a result of an accident where you, as the driver, are at fault. 

Fully comprehensive

As the name suggests, this is the most extensive level of cover available. Fully comprehensive car insurance covers the driver(s) named on the policy for damage to their own vehicle as well as any suffered to any third parties as a result of an accident or vandalism. This is in addition to any damage caused as a result of a fire or theft. 

Some fully comprehensive policies also cover the driver to use another vehicle – but not all do. If you’d like to know more about the different types of car insurance available in the UK, make an enquiry and we can arrange for an insurance expert to get in touch

What else can I cover with car insurance?

Car insurance providers will also allow for a whole range of additional features which you can usually select from including: 

  • Windscreen repair 
  • Loss or damage to personal belongings
  • Protected no claims discount
  • Breakdown cover
  • Legal expenses
  • International cover (when driving abroad)
  • 24-hour emergency helpline
  • Loss or theft of keys
  • Excess protection

Some of the features above will incur a premium for inclusion on your policy and some may not depending on your insurer, the policy type and the deals on offer at the time you are looking for car insurance cover. 

Many car insurance providers also offer policies specifically designed for particular groups of drivers, such as: 

  • Learner car insurance – for drivers with a provisional license practising on roads
  • Multi car insurance – for two or more cars in one household
  • Young drivers car insurance – for drivers who have just passed their test
  • Taxi insurance – cover for commercial hire vehicles
  • Black box insurance – includes installation of a telematic box that monitors the quality of your driving. Safer driving = lower premiums. 

If you’d like to know more about the different types of bespoke car insurance policies available, get in touch and we can arrange for an insurance expert to speak with you directly.

What does car insurance not cover?

It’s important to remember that your car insurance policy may not cover for every circumstance involved with driving a car on the roads. Below are a number of examples where your car insurance may be invalidated: 

Fronting

For policies with more than one driver, an insurer will ask you to state who is the main driver of the vehicle and anyone else is a named driver. If, in an attempt to save money on the premium, you state the main driver as a named driver this is a practise known as fronting. 

If the insurer finds out this is the case it could invalidate your policy as you have given them false information. 

A classic example of this is for a parent to give their own details as a main driver and their son or daughter as a named driver when in reality it is the other way round. 

Track events

Most standard insurance policies do not cover you or your vehicle if you use it for a track racing event or track days.

There are specialist insurers who offer track day insurance for such events. If you require this type of insurance, get in touch and we can arrange for a specialist to contact you directly. 

Business usage

You will be asked during the application stage by an insurer to state what activity your vehicle will be used for. A standard policy is designed for social usage and commuting to and from your place of work. 

Due to the nature of a lot of business activity, this can be seen as higher risk – using your car for commercial hire purposes, for example – and you run the risk of invalidating your policy if an insurer discovers this to be the case. 

In all cases, it is your duty to be clear from the outset with a provider how you intend to use the vehicle you wish to insure. The insurance experts we work with can help you find the best deals for the type of insurance cover that best suits your requirements. 

Make an enquiry and we can arrange for someone to call you and discuss this in more detail.

How much does car insurance cost?

According to the latest report conducted by the Association of British Insurers (ABI) the average cost of fully comprehensive car insurance for one year is £485. However, Statista.com suggest this figure is £692. 

Inevitably, the cost of car insurance can vary by quite a large degree depending upon an array of different factors. 

What affects the cost of car insurance?

An insurance provider needs to be able to assess the level of risk they are taking before they can confirm the premium amount for a driver. They do that by looking at a number of different areas: 

  • Vehicle and engine size / insurance group rating
  • Any performance or cosmetic modifications 
  • Driver’s address and occupation
  • Driver’s age
  • Experience as a driver
  • Number of points on driving license (driving history)
  • Planned usage
  • Previous claims history
  • Amount of no claims discount or bonus (NCD) 
  • Amount of excess
  • Additional features (windscreen cover, legal cover etc)

There are 50 insurance group ratings in the UK with 1 being the cheapest rating and 50 the highest. These ratings are predominantly based on the performance and value of the vehicle you are looking to insure.

How can I keep the cost of car insurance down?

It’s worth bearing in mind that the cheapest car insurance isn’t always the best cover. It’s also true that remaining loyal to an existing provider year after year will not always be rewarded with the lowest premium you can find anywhere else. 

There are a number of things you can do to keep the cost of your car insurance premiums down: 

Shop around

The most obvious pro-active thing you can do is make sure you make time to conduct some research when your renewal date is approaching to see what other insurance providers can offer for the equivalent cover. 

If you find a lower premium you can then go back to your existing insurer and ask them if they can match the quote you have received from a competitor. If you decide to arrange your insurance through an insurance broker, they will do this for you.

Pay annually not monthly

Most insurers or brokers will facilitate you paying for your insurance in monthly instalments. This may attract an interest charge, so it may therefore be cheaper to pay upfront – make an enquiry to speak to an expert who can find you the best deals.

Lower the risk

When buying a vehicle make sure you take into account its insurance group rating. The lower the rating, the cheaper your insurance premium should be. 

It’s also good practise to take steps on the security for your vehicle. Fitting an insurer approved alarm should also help reduce your premiums. However, most experts will tell you that the saving often does not equate to the cost of the security upgrade.

Drive safely

Building a healthy no claims discount is a guaranteed way to reduce your insurance premiums year after year. After five years you should see a significant difference in the discount you will receive. 

Only pay for the cover you need

Make sure you take into account what cover you feel you need. You may find some additional features, such as breakdown cover, can be cheaper elsewhere. You may not need breakdown cover on a new vehicle for example as it can be covered by a manufacturer breakdown policy and warranty. Make an enquiry to speak with an expert if you’re unsure about this.

Additional driving qualifications

There are a number of recognised driving courses that UK insurers will take into account when calculating your insurance premiums. If you have the time this is a worthwhile exercise to keep your premiums down. 

If you want to know more about how you can keep your insurance costs down, make an enquiry and we can arrange for an insurance specialist to speak with you directly. 

How do I make a claim on my car insurance?

We all hope we never have to make a claim against any insurance policy. However, it’s important to understand what to do should the need arise. 

Making a claim following an accident

In the immediate aftermath of an accident involving the vehicle you were driving and a third party, the first thing you should do is consider contacting the emergency services if the accident is serious and has resulted in injuries to either yourself, the other driver or any passengers. 

You then need to exchange details with the other driver, including personal information, contact details and your respective insurers. It’s also good practise to take photographs of the incident and make a note of where exactly it happened. 

After the incident, as soon as you’re able, contact your insurance provider (all UK insurers will have a dedicated claims department) and pass on all of the information regarding the incident. 

Your insurance provider will then settle your claim, including any disputes over who was to blame, on your behalf. 

Making a claim if your vehicle has been stolen

If your vehicle has been stolen the first thing you must do is report this to the police (dial 101) and give them all the details of your vehicle. They will then give you a crime reference number. 

You then need to contact your insurer and give them the crime reference number. Once they have concluded their own investigation they will pay you the equivalent market value for your vehicle. 

If the vehicle is subsequently recovered it will remain the property of the insurance company. Some insurers will agree to return the vehicle to you, should you wish, upon return of the amount that was paid out to you. 

Speak to a car insurance expert

The car insurance market in the UK is quite condensed, which can be good news if you’re looking for a competitive quote. Lots of people in your situation seek professional advice to assist them before making any decisions on the cover and provider they choose. 

If you have questions and want to speak to an expert for the right advice, call Online Money Advisor today on 0808 189 0463 or make an enquiry here

 

Then sit back and let us do all the hard work in finding the insurance advisor with the right expertise for your circumstances.

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