A comprehensive guide to car insurance

If the ins and outs of car insurance leave you perplexed then check out our comprehensive guide so you can feel confident about finding the right deal for you.

Why do you need car insurance and what does it do?

Car insurance is a legal necessity in the UK and is designed to help cover the cost of accident related injuries, damages and repairs depending on the level of cover you take out.

There are actually three broad car insurance options:

- Third party only: Covers liability for injuries to others, damage to their property and liability while towing a caravan or trailer.

- Third party, fire and theft: Basic third party cover plus cover for your own vehicle against fire damage, theft and damages obtained during an attempted theft.

- Comprehensive: The most complete form of car insurance encapsulates third party, fire and theft cover plus cover for damages to your own vehicle in the event of an accident, subject to policy exclusions. Comprehensive policies can vary widely between insurers but typically include windscreen cover, personal effects cover, accidental damage and medical expenses.  

When shopping around for car insurance, consumers should look to see which features are offered as ‘standard’ and which are ‘optional extras’. Standard cover is included in a policy automatically, whereas optional extras are available for an additional premium.

What else should you look for?

When weighing up which car insurance policy is best for your needs you should take into account what you get for your money in terms of policy features and the level of cover you will receive. However, you should also pay attention to the following:

- Cover for driving other vehicles: Generally your car insurance cover will apply to one vehicle – but there may be occasions when you need to drive another car such as in an emergency situation or if your car breaks down and you need to borrow a friend’s vehicle. Some insurance companies will allow this but you should check the policy terms.

- Excess levels: The excess is your contribution towards a claim – i.e. if you make a successful claim for £500 and your excess is £100 then you will pay £100 and the insurer will pay the remaining £400. Normally, the excess is divided into a compulsory excess set by the provider and a voluntary excess, which is an amount you agree to pay on top of the compulsory excess when taking the policy out in case a claim is ever necessary.

- Exclusions: These are circumstances in which you will not be covered – for example, you will not normally be covered to enter your vehicle into a track race under a regular policy.

- Multi-car policies: Some insurers allow you to cover more than one vehicle on a single policy, often with a discount.

- No-claims bonuses: This is a reward for people that don’t make a claim on a policy and could be worth as much as a 60 per cent discount on your premiums after four or more years. Crucially however, you will usually lose two years’ no-claims bonus for every claim you make unless you have no-claims discount protection or the insurer can recover their costs from the other driver’s insurance company.

- Specialist deals: There are a host of specialist car insurance companies on the market that deal with unique groups such as women drivers; over 50s; young drivers; drivers of imported cars; drivers of modified cars; and so on. Many of these insurers offer attractive incentives tailored for the groups they are marketing towards – for example, many female friendly car insurers offer features such as handbag cover, child seat cover and priority breakdown services. The key is to consider these deals alongside those from conventional insurers to ensure you’re receiving value for money.

Where can you get the best car insurance deal?

There is no one insurance company that is cheapest or best for everyone – the key is to take a thorough overview of the market to find the right combination of price and policy features for you. Comparison websites are a great place to start as they can compare deals from more than 120 car insurance companies and all you have to do is fill out one online form.

There are steps you can take to save money with most insurers, however. As insurers base their premiums on risk – i.e. how likely you are to make a claim – reducing this risk can lower premiums. Here are some tips:

- Agree to a higher excess: The higher the excess the more you will pay out if a claim is necessary, but increasing an excess can bring premiums down.

- Agree to a mileage limit: If you only use your car to travel relatively short distances then consider agreeing to a mileage cap as the fewer miles you drive the lower your premiums should be.

- Drive safely: Insurers generally offer cheaper premiums to those with good driving records – so avoid convictions such as speeding offences and build up a no-claims bonus.

- Enhance security: Many insurers offer discounts if you invest in security systems such as alarms, immobilisers and tracking devices.

- Park safely: Store your car in a locked garage overnight and on a secure car park during the day to earn savings.

- Pay annually: Consider paying your car insurance premiums upfront on an annual basis to avoid monthly interest charges.