Beginners' guide to car insurance

A small, red car

Take the mystery out of car insurance with our beginners' guide, then compare policies and cheap quotes to find the right deal for you.

Key points

  • Insurance is a legal requirement
  • You're responsible for answering any questions relating to your application honestly
  • You must inform your insurer of changes in circumstance or requirements
  • Car insurance money-saving tips

Finding the right car insurance policy can seem quite daunting, but we have some information to help make it simple.

Car insurance is a legal requirement

Every motorist is required by law to have insurance for their vehicle, providing cover for you and other named drivers in the event of driving-related damage or injury.

The only exception would be if the vehicle is registered as off road with a Statutory Off Road Notice (SORN).

Filling in your application

You're responsible for answering any questions relating to your application honestly. If the information is found to be incorrect it could invalidate your insurance and your insurer may not pay out for any claims you make.

Always make sure that the policy you're applying for has the right level of cover and features that you require.

Factors affecting your car insurance premiumCar

Insurers will take into account many different factors when calculating your car insurance premium. These will include:

Vehicle type: If you have an expensive car or a high-performance vehicle, you'll probably be in a high insurance group and may have to pay more for your premium.

Age: Younger drivers will usually have to pay more for insurance, as statistically they're more likely to make a claim.

Occupation: Particular jobs could raise premiums, such as chefs or journalists.

Use of vehicle: How often you use your car, your mileage and when you travel could have an effect on how much you pay. Travelling within busy peak times can bump up your premium, too.

Driving history: Prior convictions can affect the price of your insurance.

Voluntary excess: Opting for a higher voluntary excess (the amount you pay in the event of a claim) could lower your premium.

Types of policy

  • Third party only
  • Third party, fire and theft
  • Comprehensive
  • Telematics

Where you live: If your house is in an area where statistically vehicle crime is high, this could have an impact on your insurance.

Types of policy

There are four main different types of car insurance:

Telematics

Telematics policies have made great strides into the market in recent years, using a black box or mobile phone app to calculate your premium based on the standard and nature of your driving.

Third party only (TPO)

Third party only is the minimum level cover required by law in the UK. It covers:

  • Liability for injury to others (including passengers)
  • Damage to third party property
  • Liability whilst towing a caravan or trailer

Third party, fire and theft (TPFT)

For any changes that you want to make to your policy, such as your address or to add another driver, you must inform your insurance company

Third party, fire and theft covers everything that third party does, but also:

  • Fire damage
  • Theft of vehicle
  • Damage to your car caused during theft

Comprehensive

A comprehensive policy will provide you with the most extensive level of cover, including everything covered by third party, fire and theft, and usually:

  • Loss or damage to your vehicle
  • Windscreen cover
  • Personal effects
  • Accidental damage
  • Medical expenses

Some insurance companies offer cheaper policies that offer less protection, known as 'stripped down' policies. For example, they may have taken off windscreen cover or reduced what you can claim for personal effects - so always check your policy documents to make sure you have the cover you want.

Policy exclusions

Most car insurance policies will have key exclusions which will be outlined in your policy documents. Always make sure that you've thoroughly read what you're not covered for prior to choosing your policy.

Excess

An excess is what you're liable to pay towards a claim. There are two types, compulsory and voluntary.

Types of excess

  • Compulsory
  • Voluntary

Compulsory excess

  • Set by your insurance company
  • Depends on the details you've provided your insurer with when you took out your policy
  • Higher excesses are most likely on policies with young drivers, or on high-value cars

Voluntary excess

  • Amount you choose to pay towards the cost of a claim
  • Can help to reduce the price of your insurance
  • Paid on top of any compulsory excess you have

No claims bonus

A no claims bonus is a reward for people who don't make a claim on their policy.

Note that it's a 'no claim' bonus, not a 'no blame' bonus, so whether an accident is your fault or not when you make a claim, it will affect your no claims bonus, unless your insurer recovers their costs from the other driver's insurance company.

Documentation and paperwork

Once you have taken out an insurance policy, your insurer should send you or give you access to:

  • A certificate of insurance, or a cover note which is a temporary certificate - cover notes will provide you with the same protection as a certificate, but usually only for a limited period
  • A schedule and/or policy document - this sets out the full terms and conditions of your policy
  • A policy booklet (or they will tell you where to access one) - tells you exactly what your policy covers and what to do if you need to contact your insurance company

Make sure you keep your documents in a safe place where you can access them easily.

Changes to your policy

For any changes that you want to make to your policy, such as your address or to add another driver, you must inform your insurance company. This is important because if your information is false it could make any claims invalid.

You may be charged an administration fee by the insurance company for changes that you wish to make.

Also remember that your premium may alter depending on the details you amend.Car insurance groups

Driving other cars

You'll need to read your policy documents before driving another car. Some will allow it but others won't, so take care. If your policy permits you to drive another vehicle, the following usually applies:

  • You won't be covered for any damage to the car you're driving
  • The car must currently be insured
  • You require the driver's permission
  • You can only be covered for cars that don't belong to you, or vehicles not hired to you under a hire purchase agreement
  • It's for emergency cover use only, not for day-to-day use

Making a claim

In the event that you have an accident or your car is stolen, it's vital that you tell your insurer straight away. This also applies if you've had an accident but aren't making a claim.

Insurers will then take details of your claim. If you have comprehensive cover and your car needs repairing, your insurer can provide you with approved repairers in your area and arrange for it to be fixed.

Uninsured drivers

The Motor Insurers' Bureau was set up in 1946 to provide a way of compensating the victims of uninsured or untraced motorists.

You may be charged if you cancel your policy before it has ended

All motor insurers must be members of the Motor Insurers' Bureau and contribute to its funding.

The Bureau has a Motor Insurance Database which helps identify uninsured drivers. It's run by the Motor Insurers' Information Centre and holds details of all private and fleet motor insurance policyholders.

The police have access to the database so they can carry out on-the-spot checks on motorists to confirm they have current and valid insurance.

When an uninsured or untraced driver injures a third party or damages their property, the third party should receive compensation from the Motor Insurers' Bureau.

If a car is stolen and the car thief damages property or injures someone, the insurance company for the car covers these costs.

Cancelling a policy

You may be charged if you cancel your policy before it has ended. The charge could be made up of a cancellation fee and a percentage of your premium.

Cancellation rates can usually be found in your policy booklet. Remember that you won't be able to drive your car until you take out a new policy.

By Abbie Laughton-Coles