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An Introduction To Car Insurance

Before you compare car insurance prices it’s wise to know what to look for so you can be confident of not only finding a cheap deal, but value for money too.

Here we look at how car insurance works and how to determine the right policy for your needs.

Why do you need car insurance?

Car insurance is a legal necessity in the UK – it is there to protect drivers against the cost of driving related injuries and damages.

How much protection you have for yourself and your vehicle is dependent on the level of cover you take out – there are three broad options:

  • Third party only cover: The minimum level of cover required by law, this protects you from liability for injury to others (including passengers); damage to their property; and liability while towing a caravan or trailer.
  • Third party, fire and theft cover: Covers everything that a third party policy does, plus it protects your own vehicle against fire damage, theft and attempted theft.
  • Comprehensive cover: Covers everything included in a third party, fire and theft policy, plus it will usually pay for repairs or a replacement of your own vehicle in the event of an accident or theft (subject to exclusions). Comprehensive policies can vary widely between insurers but typically they will also include windscreen cover, accidental damage cover, personal effects cover and cover for medical expenses.

In addition, most comprehensive policies offer optional extras – this is additional cover available for an added premium. Some of the most widely available options include:

  • Breakdown cover: Check to see whether this includes home starts, recovery/relay, onward travel and European cover.
  • Courtesy cars: A replacement vehicle while yours is repaired.
  • European cover: Many insurers downgrade their cover to third party only when you travel abroad so check to see whether you will receive the same standard of cover on the Continent as you would at home, how many days you are covered for and whether there are any restrictions.
  • Legal protection: Covers legal costs if they arise from an accident while you are driving.
  • Personal accident cover: A payout for you or your passengers for a limited set of injuries.

What else should you look out for?

Though finding the right level of cover is vital, there are many other things to consider when choosing a car insurance policy, including:

  • Cover for other vehicles: Some insurers will allow you to drive other vehicles in emergency situations as long as you have the owner’s permission.
  • Excess levels: Most car insurance policies have a compulsory excess – an amount you must pay towards the cost of a claim. On top of this you may be able to add a voluntary excess – an additional amount you agree to pay from the outset in case a claim is necessary. Setting the excess at a high level can reduce premiums but it should only be set at a level you can comfortably afford.
  • Exclusions: Read the terms and conditions of a policy carefully and look for exclusions – circumstances in which an insurer will not pay out.
  • No-claims bonuses: Most insurers offer a no-claims bonus, which is effectively a reward for not making a claim. The size of this discount varies between insurers but typically has a maximum level which can be worth around 60 per cent off your premiums after four or more years. It may be possible to protect your no-claims bonus once you have reached the maximum level.

How to find the right policy for you

Think about the level of cover you require before shopping around and then use a comparison website to compare the deals available. The leading comparison websites compare car insurance quotes from more than 100 insurers so you can gain an overview of the market and be more confident about finding the right deal for your needs.

Remember that you don’t always have to sacrifice cover to get a cheap deal. There are a host of ways to save on car insurance including:

  • Adding experienced named drivers to your policy if they have a clean driving record.
  • Building up a no-claims discount.
  • Buying a car with a small engine – preferably below 1200cc – and a standard specification.
  • Increasing the security of your vehicle.
  • Increasing your voluntary excess.
  • Parking in a garage overnight.
  • Paying premiums annually to avoid interest charges.