What your car insurance covers can vary hugely depending on what policy you have. Usually, car insurance covers your vehicle for any damage caused in an accident or crash, whether to your vehicle or another, plus damage to the property of other drivers, and finally personal injury.
It can also be extended to cover breakdown costs, medical assistance that may be needed and theft or damage to personal belongings stored in the car. The main types of car insurance are referred to as ‘Third Party’, ‘Third party, Fire and Theft’, and ‘Comprehensive’. We’ll now explain what each one of those means in turn.
Types of car insurance
Comprehensive Car Insurance
Comprehensive car insurance is widely thought of as the best level of cover. It covers not only damage to your own vehicle but also any damage suffered by others, and from any cause including accident, fire and theft.
This is a better standard of protection than ‘Third Party’ or ‘Third Party, Fire and Theft’ car insurance.
One thing to watch for though is that Comprehensive car insurance often contains a lot of different clauses and not all policies are the same. For example, some need the policyholder to be driving the vehicle for a claim to be valid, while others do not.
That’s why it is so important to thoroughly read the terms and conditions of your insurance policy, so you’re fully aware of what it includes and what it doesn’t include.
Third Party Car Insurance
Third party car insurance is the lowest level available and covers damage caused by you or one of your passengers to other drivers and their vehicles, as well as objects such as lampposts and walls. This type of insurance, does not cover the cost of damage to your own car meaning you’ll have to pay for any damage you need to repair.
Third Party, Fire and Theft Car Insurance
The Third Party, Fire and Theft policy is the same as Third Party cover, except it also pays to replace or repair your car if it is stolen or damaged in a fire. It is often taken out by those that only want Third Party insurance (i.e. they don’t want to cover damage to their own vehicle), but they want a greater layer of protection in case of accidents or incidents out of their control.
If your vehicle is relatively cheap or old, it’s a good idea to look into Third Party, Fire and Theft Insurance as it is often a lot cheaper than fully comprehensive cover.
Factors affecting the cost of car insurance
Changes to your premium
Your insurance ‘premium’ (the amount you pay for your insurance each month/ year) is based upon many different things, including your history as a driver, the car and its level of power and your own personal circumstances. If you are a more experienced driver, and you live in a safe area with a sensible car, your premium will likely be relatively cheap.
You should consider your ‘excess’ – this means the amount of money you will have to pay towards any insurance claim you make. There is the compulsory excess that the car insurer sets, in addition to the voluntary excess which you can choose to alter yourself.
You should choose your level of excess carefully, as it can affect the size of the insurance premium your insurer offers you. For example, if you choose a higher voluntary excess, this means you take on greater personal responsibility for the car which can lower your insurance premium. However, if you are involved in an accident and you have to make a claim you will have to pay this larger amount.
No claims bonus
The ‘no claims bonus’ is a discount that may be offered by insurers if you don’t make an insurance claim for a long period of time. If you make a claim, the bonus is normally cut, but you can pay to protect your no claims bonus – you’ll usually have to pay 10-15% of the insurance premium to do this. This policy differs from insurer to insurer so be careful to check this fully, to ensure you make the right decision.
Many car insurance policies prices are calculated based on statistical data, which means that younger drivers are often hit with larger premiums as they are deemed more likely to claim on insurance. Whilst there is little you can do to influence this, there are other things you can do to help to drive the price of car insurance down.
Which car you drive
Cars that are very valuable, have lots of power or certain modifications can increase the cost of insurance, because insurers think they are more likely to be stolen, get into an accident, or simply costlier to replace if an accident happens. If you’re looking to minimise your insurance premiums, buying a car that is most suited to your needs will ensure that your insurance is no higher than it needs to be.
Similarly, if a specific car comes with different size engines, it may be worth researching to see how the difference in power can affect insurance premiums. It may be cheaper to go for a smaller engine size if you can do without the power.
How you use the car
How you use the car or van you want to insure can influence the price of insurance. Vehicles use to commute to work can sometimes demand higher premiums than if they were only driven socially as they are deemed to be at a greater risk of accidents.
Furthermore, the annual mileage that the vehicle covers can have an impact on the price you may have to pay. A car that travels a greater distance is perceived to be a higher risk to ensure, thus potentially driving up the price.
Where you live
Where you live can have an impact on how much you pay for car insurance based on the traffic levels in the area and the likelihood of vehicle theft and crime. Unfortunately, if an area is deemed to be a higher risk to insurers, it can result in a larger premium.
Where you park
Some insurers will take into account where you park your car overnight as a factor in calculating insurance costs. Whilst most people would assume keeping a car in their garage overnight would result in the lowest premiums, this is not always the case.
As each insurer will calculate their prices in a different way based on the information they have available, it is worth comparing how different insurers treat different overnight parking if you have the choice between several options to park your car.
Adding a named driver
Adding a named driver to your policy can sometimes help to reduce the cost of a premium, but you should always compare the prices offered. Similarly, if you are the main driver of a car, the policy should always be in your name since any inaccuracies in your insurance when you apply can potentially result in problems later down the line if you need to make a claim.
Getting the best value for money with car insurance
Compare different car insurance types and policies
When you come to buy car insurance, it’s important to compare all the different types to make sure you get what you need from a policy. There are a number of insurance comparison websites available which makes comparing all the different types easy, such as confused.com.
It is also worth investigating any companies that aren’t present on comparison sites, including local insurance brokers, to see who can offer you the best deal.
Check your insurance yearly to see if you can get a better deal
As well as comparing insurance types and policies when you initially buy cover, you should also look to compare insurance when your policy is up for renewal each year. Although you may assume your premiums with a particular company will decrease after a year of cover, especially if you have made no claims, this is often not the case.
You can potentially save a lot of money by shopping around when your insurance is up for renewal. Another tip is to contact your current insurance company when it comes to renewal to let them know you’re considering swapping to another provider as insurance companies can sometimes improve their offer if you tell them you do not want to renew.
Some insurers may sweeten the deal they offer you with additional extras such as breakdown cover, roadside assistance, or driving other cars (DOC) cover. This is worth taking into consideration when you compare final costs, as if you need these features, or would be purchasing them separately anyway, this may represent the best value for money (despite initially looking more expensive than other premiums which do not offer such cover).
You should always read your insurance agreement carefully to understand exactly what is being offered to make sure your money goes the distance.