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 Car Insurance

If we drive a car on the public roads we need car insurance (sometimes known as Motor Insurance).

Motor insurance policies can vary wildly in price as it is dependant on many factors. Where the car is kept, the driver(s) occupation, the age of the driver(s), the annual expected mileage, the occupation of the driver and of course the type of car. All things being equal, a 50 year old married man who drives 5000 miles per year and stores his family saloon in a garage overnight will pay a much lower premium than a 19 year old man who drives a "hot hatch" and parks it on the public road.

In the UK, you don't have to have home insurance, life insurance or health insurance, but having current car insurance is compulsory. This is to protect third parties against the financial consequences of loss, damage or injury caused by a car or car accident.

What types of car insurance are available?

The basic level of car insurance cover normally offered is usually called third party only insurance. This protects you if there is any claim against you, but doesn't protect you for any damage caused to your car that you cannot claim for against another persons insurance - e.g. theft or damage to your car in an accident in which you were at fault.

The next level up is third party fire and theft car insurance. This gives you the car insurance included in third party only insurance, but also provides insurance cover if your car is damaged by fire or is stolen.

The top level of car insurance is comprehensive car insurance. This level of insurance cover allows you to make a claim for any damage that might occur to your car.

Are there any other types? I've heard about classic car insurance for instance.

As well as standard Comprehensive car insurance and Third Party car insurance there are other, more specialised policies that may be available (they are in themselves third party insurance or comprehensive insurance, but they are aimed at particular types of car or driver).

Classic Car insurance is available to people driving cars over a certain age (you may possibly have to agree to limited mileage too)

Motor Traders Insurance is available to businesses and individual in the motor trade. This type of policy will usually cover the insured to drive any car in their care. It will usually cover vehicles taken off the traders main trading site to their home over night. Car valeting businesses and car servicing garages should also be able to obtain this type of insurance so that vehicles in their car are covered.

I have exactly the same car as my neighbour, but my policy costs 50% more. Why?

Many factors affect the cost of an insurance policy. You may have exactly the same car as your neighbour, but that doesn't necessarily mean your policy will cost the same.

A few factors affecting the cost of your policy include, drivers age, age of any additional drivers, whether you are insured to use the vehicle in connection with your business (in addition to standard commuting to and from your normal place of business), the amount of miles you travel each year and your occupation.

How can I get cheap car insurance?

There are various things that you can do to get cheap car insurance and reduce your insurance premium. You can elect to increase your voluntary excess. Most motor insurance premiums have a compulsary excess, but if you agree to a voluntary excess as well it usually reduces your premium. If you only travel 5,000 miles per year, tell your insurance company. Informing the insurer that you travel limited miles within a year usually makes your motor insurance premium cheaper. Don't include your 19 year old brother who has just passed his test. It might seem like the brotherly thing to do, but having a young, inexperienced driver on your insurance is a sure way to increase the cost. Garage your car overnight. A car locked away in a garage overnight is less likely to be stolen or damaged. This should knock a few pounds off your premium.

But above all, be a safe driver. A full no claims discount can knock well over 50% off your premium.

What is a "no claims" discount?

As a reward for not making any claims against your motor insurance, insurance companies will give you a no claims discount. For example, if you have not made an insurance claim for 12 months, your insurance premium may be reduced by 15%. The percentage discount will continue to rise the longer you go without a claim up to a certain limit (usually 5 years). You will then have what is known as a maximum no claims discount.

If you do make a claim once you have built up a "no claims" discount, your discount will usually be reduced (unless you have a protected no claims discount).

The exact way that this works will depend on your particular policy, but as an example, if you have 5 years no claims discount and you then make a claim, your no claims discount may be reduced to 3 years.

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