Guide To Car Insurance

Take just a little step back from that barely noticed annual event, however, and it soon becomes apparent that car insurance comes in many shapes and sizes, to fit any number of different vehicles, an army of different drivers, and the size of practically any pocket.

This guide takes a closer look at:

just what car insurance covers;
the type of motor insurance which might be suitable for you;
the range of additional benefits that may be added on to your motor insurance policy; and
the specialist forms of cover available for a whole range of non-standard vehicles – and drivers.

You may find this guide helpful not only in the run up to your next insurance renewal date, but also whenever you are thinking of buying a new – or used – car, whenever you are next trying to knock your household budget into better shape, or simply to reflect on just what it is you are buying when you arrange insurance for your car.

The guide might prompt some questions which seem to be left unanswered. In that case, why not give us a call here at GSI Insurance so that we may give you the benefit of our experienced, wide and specialist knowledge of the motor insurance market.

What does car insurance cover?

Car insurance is designed to offer financial protection for two very broad groups of people – you and others.

Third party

It is the objective of protecting other people’s interests that makes insurance for your car not only a matter of importance but one that has the full sanction of the law behind it – if you are going to drive a car in a public place, you must be covered by the basic minimum of insurance.

The reasoning behind the law is really very simple – and is explained in straight forward terms on the official government website. If you have an accident involving your car and it results in loss or damage or personal injury to someone else, another vehicle, an animal or property, you may be held liable for that loss or damage and ordered to pay compensation to the victim or victims.

These are known as claims from third parties and the level of compensation awarded – especially in the event of personal injury or death, for example – may be very considerable indeed.

The law exists to ensure that if you do not have the funds to cover the compensation rightfully claimed by the third party, they are nevertheless fully compensated by the insurance you hold. For that reason, third party insurance is a legal minimum.

It is important to remember that third party insurance is for the benefit of others – it does not cover any loss or damage you might suffer, such as that to the vehicle you are driving.

Simply owning – or being the registered keeper of – a vehicle that is used on the road or other public space carries with it that legal requirement for it to be covered by a minimum level of third party insurance.

If you are caught driving without at least the basic third party insurance, moreover, the penalties are considerably stiffer:

disqualification from driving – typically for a year or more;

a unlimited fine; or
a fixed penalty of £300 and 6 penalty points on your driving licence; and
the seizure – and possible destruction – of the vehicle that is being driven without insurance.

It is difficult to understate, in other words, the importance of ensuring that you have third party cover before you think of taking to the roads behind the wheel.

Third party, fire and theft

Having grasped the principle of third party insurance, it might be seen how third party, fire and theft represents a step up in the level of cover provided, since it also offers you yourself some protection against two of the major risks which might result in the total loss of the vehicle.

Simply, it provides all the protection of cover against third party claims, but also extends to compensation for you in the event that the car is stolen or catches fire.

If the vehicle is stolen and subsequently recovered, you may claim for any damage that was incurred during the theft. Thieves often try to hide evidence of their involvement by setting fire to a vehicle and third party, fire and theft insurance covers this and damage for any other reason as the result of fire.

If there is an attempted theft, but your vehicle is not actually stolen, however, there is no cover for any loss or damage incurred as a result of the attempt. Furthermore, if your car is written off as the result of an accident, third party, fire and theft insurance offers no basis for any claim for compensation.

This level of insurance typically carries an excess – the first part of any insurance claim which you must bear yourself. The excess therefore represents an uninsured risk that you continue to bear. There is commonly a compulsory excess which the insurer obliges you to bear and you may often be offered a further voluntary excess – extending your own responsibility for the cost of any repairs – in return for a reduction in the cost of the premiums.

Third party, fire and theft insurance is still quite basic in the cover it offers and is therefore commonly used for less valuable, older vehicles. Although the premiums may appear relatively low for this kind of insurance, it is important to consider all those additional risks of loss or damage typically covered by comprehensive insurance.

Comprehensive insurance

This might be regarded as the gold standard for motor insurance.

It provides protection against all of the risks covered in third party and third party, fire and theft policies – and considerably more. The principal difference is that comprehensive insurance also covers damage to your own car, including any damage caused through your own fault.

Comprehensive motor insurance is also likely to carry a compulsory element of excess and give the insured the option of shouldering an additional voluntary excess in order to reduce the cost of premiums.

If the loss or damage to your car was caused in an accident with another vehicle that was not your fault, your insurer typically attempts to recover the cost of repairs or replacement – and what you have paid in excess – from the insurer of the other vehicle. If it is judged that you have contributed to the accident in some way, you may have to pay a proportion of the excess to which you are committed.

The common perception about the increasing costs of motor insurance may be tempered by the fact that premiums for comprehensive insurance have increased at a slower rate than those for third party, fire and theft cover – according to the website Wikipedia.

What type is suitable for you?

Provided you have arranged at least third party insurance, the level of cover is essentially a matter of your own choice. The type of insurance that is suitable for you, therefore, reflects your own individual needs and circumstances and may be quite different to those of another motorist intending to drive more or less the same make, model and age of vehicle as your own.

The choice might often be based on the perceived cost of insurance – third party believed to be the cheapest, third party, fire and theft, being the next price bracket up and comprehensive insurance coming in as the most expensive.

Counter-intuitively, often a lower level of insurance might not always be the cheapest – it is not uncommon to secure wider cover at a lower price. The lesson, therefore, is to shop around with an open mind about the level of insurance you need and the price you are prepared to pay for it.

The following are some of the factors likely to be taken into account by a motor insurer:

Value

probably the most critical factor to be considered is the value of your car;
this may be determined by its age and condition – from a brand new vehicle straight out of the showroom, through a well-maintained second hand car, to a well-used, high-mileage vehicle in need of some tender loving care;
different makes and models of vehicles also vary in value of course – and as far as insurers are concerned, it is the cost of repairing or replacing a vehicle that is the determining factor, so that imported, rare or custom-built vehicles with a high cost of repair are likely to attract correspondingly high premiums;
when declaring the value of your car, it is important that you bear in mind its actual market value and not what you happen to have paid for it;
a useful and independent resource in this respect is Parkers Guide, which publishes valuations for practically make, model and age of car – thus letting you know whether the £10,000 you paid for your car, for example, was less than a good buy since Parkers values it at only £7,000
choosing between third party or comprehensive insurance, therefore, may be a matter of deciding how much you stand to lose if your car is stolen or damaged;

Record

a further factor determining the price of insurance premiums – and therefore the level of insurance you might choose – is your driving record and history of past insurance claims;
a string of motoring convictions or record of costly insurance claims is hardly likely to impress any insurer to whom you are currently making an application – so the higher premiums are likely to reflect the fact that you are considered a higher risk;
although there may be little you are able to do about your previous record, these considerations nevertheless point to the importance of being an especially careful driver in the future;

No claims bonus

A notable feature of comprehensive insurance in particular is your usual ability to earn a no claims bonus or discount;
Just as the name suggests, this is a discount given on the current cost of your premiums in recognition of the fact that you have made no (or in some cases few) previous claims;
The discount typically builds up over successive years and may reach as much as 60% on the cost of your next renewal;

Excess

it has been mentioned that both third party, fire and theft, and comprehensive policies are likely to attract a compulsory excess;
you may be able to reduce the cost of premiums by taking on a greater amount of voluntary excess, but this represents something of a balancing act, since too high an amount of excess may defeat the whole object of having insurance;

Age and postcode

both your age and where you live are also generally considered by insurers to be risk factors – younger drivers and those living in areas of higher than usual rates of crime tending to be regarded as representing a greater risk;
there is precious little you may be able to do to change either of these factors, of course, although understanding the way in which they influence the insurer’s assessment of risk may in turn affect your decision on the most suitable level of insurance to meet your needs and circumstances.

Choosing the most suitable type of insurance may be a personal decision reflecting your individual requirements, but there are a number of factors which it is worth taking into account – not least the fact that choosing a lower level of cover is always going to be the greatest money-saving option.

Add-ons

Comprehensive insurance typically covers considerably more than you might expect from a simple step up from cover for third party, fire and theft.

It might be helpful to take a look at some of these add-ons, but also bearing in mind that whilst some insurers may include them as standard features of their comprehensive policies, not all of them do so – it is worth checking your policy carefully:

Legal expenses

if you are involved in an accident where blame is disputed by the third party, you may want to pursue your claim through legal action;
this may be important since establishing that you were not to blame might affect your claims history, your no claims bonus and the recovery of any excess you may have had to pay;
legal expenses cover helps to cover the costs of such action;

No claims bonus protection

given that it may be worth up to a 60% a year reduction in your insurance premiums, your no claims discount (NCD) is clearly valuable;
it may be possible to protect the discount you have earned by arranging as an add-on no claims discount protection insurance;

In-car entertainment

from car hi-fi systems to speakers, CD and mp3 players modern cars may be fitted with all kinds of in-car entertainment – comprehensive insurance typically safeguards such equipment against theft and attempted theft;

GPS

the same goes for sat-nav devices, which may or may not be covered by your particular policy or which might be subject to different conditions depending on whether the device is a permanently installed part of the car’s equipment or entirely removable;

Personal belongings

although many comprehensive policies may offer cover for the theft or damage of personal possessions in your car at the time of the incident, there are usually limits to the amount which may be claimed;
items of particular value, for example, might either be insured separately or taken with you from the car when you park it;

Windscreen cover

cover for damage and replacement of your windscreen may be included as a standard feature of your cover or available as an add-on;

Theft or loss of keys

clearly your car may be at its most vulnerable if you lose the keys or they are stolen;
insurance may extend to the replacement not only of the keys themselves but also the replacement of the relevant locks;

Repairers

some insurers require that any repairs to your vehicle are carried out by one their own nominated garages – others give you the option of choosing the one you prefer (sometimes provided you are able to get alternative quotes for the work);

Courtesy cars

a number of insurers arrange and pay for a courtesy car whilst your own is undergoing repairs that are subject to a claim;
in order to qualify, you may sometimes be required to use only an approved repairer;
you might also want to check the maximum duration for which you are able to use a courtesy car – typically, there is a limit of between 14 and 21 days.

It may be apparent, therefore, that there is a whole list of included or add-on features giving extra value to your comprehensive insurance. You might want to check your policy as to which are included as standard features and which of them you might want to purchase as add-ons.

Specialist cover

Not only are there different levels of insurance cover available, with a range of add-ons available when you choose comprehensive cover, but there is also a wide range of policies that meet non-standard requirements by offering specialist cover.

Just as the term suggests, however, specialist cover is likely to be offered only by specialist insurance providers – such as those of us here at GSI Insurance. Our own forms of specialist cover, for example, include the following.

Insurance for people with criminal convictions

If you have been unfortunate enough to pick up a conviction for any type of offence – not just a motoring offence – you might find it difficult to find an insurer prepared to offer cover for your car.

Some insurance providers, such as ourselves, recognise that a conviction in itself does not make you a bad driver and may typically be able to arrange policies that give you the cover you need at a competitive price.

You can read our guide to insurance for people with criminal convictions

Insurance for provisional drivers

Provisional licence holders tend to be younger, 17 to 18 years-olds.

There is a form of cover available from specialist insurers which offer a so-called “black box” system which monitors the youngster’s driving habits and rewards restrictions to normal driving hours with a stable premium but penalises driving between the hours of 11 p.m. and 5 a.m. with “fines”.

Further reading: Young drivers insurance guide and guide to provisional and learner drivers insurance

Insurance for prestige and classic cars

Prestige and classic cars may also present a special case when it comes to arranging insurance.

Owners of such cars may be more demanding in their insurance needs, for example, so there are providers adept at arranging full comprehensive cover that might include a guaranteed courtesy car in the case of an accident, personal accident cover, protected no claims bonus, legal assistance and a 24-hour claims helpline.

Insurance for 4x4s

With the growing popularity of a whole range of 4x4s and SUVs, it might be welcome news that some specialist insurers are able to offer discounted premium rates for such vehicles.

Insurance for modified cars

Modified or customised cars appear to give many insurers a headache.

It is more difficult for standard insurers to arrive at a reliable valuation of such vehicles, just as it is difficult for them to estimate the risk of costly repairs. As a result it may be difficult to find insurance cover for your modified car. Some specialist insurers take pride in meeting the particularly individual customisation of some drivers’ cars and therefore make it their job to find insurance cover for them at a competitive rate.

Summary

If nothing else, this guide may have gone to show quite what an extensive subject motor insurance may be. It might be helpful to run through some of the issues raised the next time to prepare to renew the annual insurance cover for your car.

What are you expecting the insurance to cover, for example, and what level is likely to be suitable for your needs – third party, third party, fire and theft or comprehensive?

As you home in on the type of cover you believe you may need, you might want to check very carefully quite what aspects of protection are included as standard in any given insurer’s policies and what you have the option of including as add-ons.

Finally, you may want to bear in mind that everyone’s needs, circumstances and chosen motor car is likely to be different and that special requirements may apply. For these, a wide range of specialist cover is available from certain insurance providers. Why not get in touch to find out how we can help?

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