All vehicle owners are required by law to take out car insurance. There are a number of different car insurance policies available, but in general they all cover damage that you may cause to other vehicles, and to other motorists. Some policies also include other additional benefits including breakdown cover, medical expenses and cover for your personal belongings.
There are three main types of car insurance the first being third party insurance. This type of insurance offers the very basic level of cover and can often work out cheapest. It does not cover damage to your own car (you would have to pay to repair or replace your vehicle yourself) but it does pay out if you cause damage to other vehicles and to their drivers, as well as to things such as walls and lampposts.
The second type of car insurance is third party, fire and theft. This type of policy is the same as third party insurance but the insurance provider will also pay out if your car is stolen, or damaged by fire.
The third type of car insurance is comprehensive car insurance and, as the name suggests, this type of policy covers extensive damage to your vehicle plus all of the benefits of third party, fire and theft insurance. Comprehensive car insurance also gives you the opportunity to purchase a number of different add-ons including, for example, cover that will allow you to drive other people’s vehicles, including hire cars.
Car insurance providers take into account a number of different factors when setting your premium. These factors generally include the make and model of your vehicle, your personal circumstances and your history as a driver. If you are a young driver with little experience on the road, driving a high performance car, then your premiums will be much more expensive than a more mature driver who has been driving for years and who owns a more practical vehicle.
All car insurance providers include an excess in your policy. This refers to the amount of money that you would need to pay towards any claim that you make on your policy. If, for example, you have a £100 excess and you make a claim for damage worth £800 then you would only receive a £700 pay out from your insurance provider. An excess usually comes in two types; a voluntary excess which you are able to set yourself, and a compulsory excess which is set by the insurance company and cannot be altered. If you choose to set your voluntary excess to a higher figure then you will receive a lower premium, but make sure that you set this excess to a figure that you can comfortably afford as if you do make a claim it could prove to be very expensive.
The majority of car insurance policies will cover you if you are driving your own vehicle overseas in the EU. This cover will automatically match the legal requirements of the country in which you are driving. Most often, this cover is equal to standard third party insurance. However, if you have comprehensive car insurance you may be offered cover which will enable you to drive overseas at the same level of cover you receive at home. Usually this cover will last for between 60 and 90 days, and when this period goes by your policy will revert to the standard legal level. If you do require cover that exceeds the number of days stipulated in the allowance period then you can either take out an extension to your policy for a small fee, or incorporate this extra allowance when you initially take out your policy.
All car insurance providers offer a no claims bonus. Every year that goes by without you making a claim will result in a discount to your premium. The level of discount varies between insurers. However, if you do make a claim then your no claims bonus will be cut; although again, the level of this cut will vary between different providers. Many car insurance providers will also take into account whether a claim resulted from an accident that wasn’t your fault when determining whether your no claims bonus will be affected.
You can protect your no claims bonus by paying an additional amount; usually ten to fifteen percent of your premium. However, this feature is usually only available after you have spent more than four years with the same insurer. If you do choose this option then your no claims bonus will be protected, but your premium is still likely to increase even though the discount you receive will remain the same.
Many comprehensive car insurance policies will allow you to drive the vehicles of friends and family members, and sometimes hire cars depending on the provider. However, the cover you receive is usually limited to third party coverage. You can though, if you wish, add additional drivers to your policy. These are known as ‘named drivers’ and they will automatically be insured to drive your car.
Different car insurance policies work in slightly different ways, and it is important to consider carefully your needs and requirements when taking out a policy. Read the small print carefully, and take advice from an industry professional if you feel that you need it.