Insurers ask a series of questions to everyone who is interested in insuring their car with them. This helps them identify the risk they are taking on i.e. how likely someone is to make a claim on a policy.

Generally, insurers evaluate (rate on) the same factors when calculating premiums, but as no two risks are identical, prices can vary from one company to another.

The main areas they look at are:

Car insurance group

All vehicles have a group rating given to them by The Association of British Insurers (ABI)^*. The ratings are based on the risk of the vehicle.

Factors used to calculate group ratings are:

• What the vehicle is worth
• Damage and parts costs – the likely extent of damage to each car model and the cost of the parts needed to repair it. Generally, the lower the costs, the more likely a vehicle is to have a lower group rating
• Repair times – longer repair times mean higher costs and the greater likelihood of a higher group rating
• New car values – the prices of new cars are considered as they are often a good guide to the cost of replacement and repair
• Body shells – the availability of body shells (the basic frame of the car) is taken into account in group ratings because they are essential for certain accidental damage repairs
• Performance – acceleration and top speed are important factors
• Car security – security features fitted as standard equipment by motor manufacturers can help to reduce insurance claims costs

Insurers may reassign a vehicle to a different group based on trends they identify from their own records. For example if a certain car type was involved in many accidents, its group rating may increase, as would the premium charged for the vehicle, to cover the extra claim costs.

Claims history

All insurance companies ask about people’s claims history, usually for the last 3 to 5 years. It stands to reason that the more claims someone has made, the more money insurers have paid out to cover their claim costs, they are therefore a greater risk and will be charged more for their policy.

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Drivers

Insurers will look at all the drivers covered on your policy when deciding how much to charge you for your insurance.

Adding on a driver who is considered a safe risk (for example with no claims or convictions, has been driving for over twenty years) may cost nothing more than an administration charge. However, many insurers charge for changes you may want to make to your policy. If for example, you add a driver who’s under 25 and has a speeding conviction, and you have a powerful car then you can expect your insurer to increase the price of your insurance substantially to cover the costs of the increased risk.

Driving convictions

Insurance companies will rate on driving convictions. If you have a conviction on your licence then insurers consider you to be a greater risk on the road than a driver with no convictions.

Your insurer will ask for details of convictions in the last 3 to 5 years.

The more serious the conviction in nature, the more your insurer will add to your premium. Sometimes an insurer may add special terms to a policy or only offer lesser levels of cover for more serious convictions.

Medical conditions

Insurers cannot charge extra for medical conditions if you hold a licence without any restrictions. If you do hold a restricted licence your insurer may need to take this into account when reviewing the risk. They may also take adaptations to vehicles into account if it means it will cost more to replace the adaptation (and so increase the risk).

Everything that may have an effect on your ability to drive has to be notified to the Driver and Vehicle Licensing Agency (DVLA). The DVLA website^* has a lot of information about driving and medical conditions which should help clarify any questions you need answering: http://www.dvla.gov.uk/medical/ataglance.aspx.^*

Mileage

The more time you spend on the road the more likely you are to have or cause an incident, so your premium will increase the more you drive. As with all the risk information you supply, you should be as accurate as possible when telling your insurer what your annual mileage is.

Occupation

Your insurer will class certain occupations as a higher risk when, for example, someone carries goods in their vehicle.

A builder may carry over a £1000 worth of equipment in their vehicle. An insurer may consider this a far greater risk of the vehicle being stolen and potentially damaged or not recovered.

Other occupations which carry a higher risk with insurers are professional sportsmen and sportswomen, entertainers, chefs and those linked with licensed premises.

Security

Insurers will look at the security systems on your car when deciding what to charge for a policy. If your car has an alarm and/or immobiliser fitted it is less likely that it will be stolen – you can therefore expect to pay less for your motor insurance policy than someone who has no security device on their car.

Vehicle value

The value of your vehicle will play a major factor in how cheap or expensive your insurance premium will be. A car costing £70,000 will cost more to repair if it is damaged in an accident or to replace if stolen, therefore the price of your insurance will be more than the insurance for a car worth £7000.

Vehicle age

Much the same as vehicle value, an older vehicle can often receive discounted rates as the vehicle value is lower. This is not always the case as some vehicles will be recognised as classic cars which could possibly increase your premium due to potential difficulty in obtaining parts.

Vehicle use

What you use your car for will have a substantial effect on your insurance premium. If you only use it for driving between family and friends or to go shopping, this would be the minimum risk to an insurer. However, if you use your vehicle for both social and business use, you will face a higher rate from your insurer, as you are considered at greater risk of making a claim because of the extra mileage you drive or the goods you may carry.

The different categories of vehicle use are:

• Social, domestic & pleasure – you are covered for day to day driving, such as a visiting family, friends or going shopping but not to drive to work
• Social, domestic, pleasure and commuting – you are covered for everything in the social domestic and pleasure category, plus driving to and from one fixed place of work. It also includes travelling and parking at a railway station
• Business use – you can use your car in connection with your job, such as driving to more than one place of work
• Commercial travelling – you can use your car for things like door to door sales

Remember! Your policy documentation will state what you can use your vehicle for.

Your address

Where you live is another important factor to an insurance company when it comes to assessing your premium. In a city you can expect increased levels of traffic as opposed to the countryside so there may be a greater chance that your car will be involved in an accident, be vandalised or be stolen. Certain areas have a higher level of car crime and insurance premiums tend to reflect that risk.

Also leaving your car out on the road overnight, rather than in a locked garage may affect your premium.

Remember! You must tell your insurance company if you move or if you spend more time at one address than another (for example a student may be at home at the weekends but spend the majority of time at college), they may not pay out on a claim if you haven’t disclosed this.

All car insurance policies are different, which is why you need to check your policy documents to see what is included as standard on your policy, and what optional extras are available for you to buy.

Here are some of the most common policy extras:

Legal protection

• Pays for legal costs if they arise from an accident which happens while you are driving
• Provides assistance to recover uninsured losses (such as solicitors fees etc) from the other driver’s insurance company should you be involved in a non-fault accident
• Arranges for a solicitor to pursue a claim for compensation if you are injured
• Generally helps with the recovery of the excess on your policy, medical losses or loss of earnings

Breakdown cover

Assists in getting your car back on the road or to a garage if you breakdown. You can pay for different levels of cover such as:

• Recovery/relay – if your vehicle can’t be fixed at the roadside or locally, you (and a set number of people travelling with you) will be taken to any UK mainland destination
• Home start – for when you break down at home or near to home
• Onward travel – if you break down away from home and your car cannot be repaired quickly, you will generally be provided with either a replacement hire car, or overnight accommodation, or reasonable onward travel expenses
• European cover – breakdown protection when driving in Europe, usually for up to 31 days per trip and 90 days per year in total (please check with your insurance company for the European countries you will be covered in)

Insurance while driving abroad and Green Cards

• A green card provides basic Road Traffic Act cover for driving while on holiday abroad
• Recognised in over 40 countries (check with your insurer what countries they cover)
• Insurers charge for extending the same level of cover abroad as you have at home
• Some countries will confiscate your car if you cannot provide the correct documentation

Courtesy car cover

• Basic cover provides you with a car if you have an accident and your car needs repairing
• Must use your insurer’s approved repairer
• Enhanced policy provides a replacement car if your car is stolen or written off

Personal accident cover

• Basic cover provides a small payout to you or your passengers for a limited set of injuries such as:
• Death;
• Permanent and total loss of sight in one or both eyes; or
• Loss of, or permanent and total loss of use of, one or more limbs at or above the elbow or knee
• Enhanced cover increases financial payouts

Windscreen cover

• Covers repairs to chips or cracks in your windscreen or to replace your damaged windscreen
• A small excess usually applies
• Usually included in comprehensive policies

What documentation or paperwork will I get?

Once you have taken out an insurance policy, your insurance company will send you:

• A certificate of insurance (or a cover note which is a temporary certificate)
• A schedule and/or policy document
• A policy booklet (or they will tell you where you can access one)

Your certificate is evidence that you are legally insured and is one of the documents the police will ask to look at if you are stopped while driving.

If a broker or insurer needs time to complete their paperwork before issuing you a full certificate, they will send you a cover note. This gives you the same protection as a certificate, but is usually only for a limited period, for example 30 days.

The schedule and/or policy document is different from the certificate. It sets out the full terms and conditions of your insurance policy.

The policy booklet sets out all the terms and conditions of your policy. It will tell you exactly what your policy covers and what to do if you need to contact your insurance company.

Remember! You should always read all the documents sent to you to make sure all the details are correct and that you have the level of cover you need. If you have any concerns or queries, contact your broker or insurer.

If the information you give to your insurer is not correct, it could invalidate your insurance if you have to make a claim against your policy, which means the insurer may not pay out for your claim.

You also need to tell your broker or insurance company everything you believe to be relevant or important that may affect your policy; about you, your driving history, claims or convictions, etc.

You are required to inform them of any relevant information whether or not they have asked you about it. This mean literally everything that relates to you as a driver/road user and your vehicle.

Remember! Keep all your policy documents in a safe place just in case you need to prove you’ve got car insurance during the policy term.

What is included in my policy?

What your policy covers depends on what type of cover you have chosen and any additional cover you may have bought. Your policy documentation and policy booklet will explain exactly what is covered under your car insurance policy.

What types of policy are there?

There are three main types of policy which each offer a different level of cover.

Third party only (TPO)

This is the minimum level cover required by law in the UK. It covers:

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

It does not cover you for accidental damage to your own vehicle, you will have to pay for that yourself.

Third party fire and theft (TPFT)

This covers everything that third party only does, plus:

• Fire damage
• The theft of your own vehicle; or
• Damage to your car caused during the theft

Comprehensive

Comprehensive is the most extensive cover and includes everything Third party fire and theft does, and usually:

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

Remember! Some insurance companies are now offering 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.

Can insurers exclude things from policies?

Most policies will feature key exclusions. These will be outlined in your policy documents, and will highlight all of the areas that your policy will not cover. For example you might not be covered to drive other cars if you are under 25 and you will not be covered to race your car under a normal insurance policy.

Will I be covered by my insurance if I drive another car?

Sometimes we need to drive another car in an emergency or at short notice, for example if your car breaks down and you need to borrow a friend’s car. Some insurance companies will allow this, you need to check your policy documents to see if you’re covered.

If you do have this cover, the following usually applies:

• It is third party only cover on another vehicle, you won’t be covered for any damage to the car you are driving
• The car must be currently insured by another party
• You have the owners’ permission to drive
• You can only use it for cars that do not belong to you; or
• Vehicles not hired to you under a hire purchase agreement
• It is for emergency cover use only, not for day to day use

What is an excess?

An excess is what you are liable to pay towards any claim. It usually has to be paid to the garage fixing your car once it’s repaired before you can drive it away.

Let’s say you damage your car by reversing it into a wall. This is known as an accidental damage claim. If your accidental damage excess is £250 and the cost of repairing your car is £600, your insurance company will pay £350, and you will have to pay the garage the remaining £250.

The main excesses types are:

Compulsory excess

• Is set by your insurance company
• Depends on the details you provided to them when you took out your policy
• Higher excesses are more likely on policies with young drivers or high value cars

Voluntary excess

• When you take out a policy, you choose to pay more towards the cost of a claim
• Generally reduces the price of what you pay for your insurance when you buy it
• Is paid as well as any compulsory excess

What about no claims bonus?

No claims bonus is a reward for people who don’t make a claim on their policy. Insurance companies will usually give a discount for claim free driving, it is a ‘no claim’ not a ‘no blame’ discount, so if you do claim on your policy despite an accident not being your fault, it will affect your no claims bonus unless your insurer recovers their costs from the other driver’s insurance company.

The basics of no claims bonus are:

• For every fault claim you make, you lose 2 year’s bonus
• Most insurers have maximum no claims discount levels, commonly 4 or 5 years
• You can usually protect your bonus once you reach the maximum discount level
• If you protect your no claims bonus and make a claim, you do not lose 2 year’s bonus, you will still receive maximum discount on your policy
• What you pay for your insurance may increase when you renew your policy as you have made a claim (insurance companies see policies with claims as a greater potential risk than claim free insurance policies)

How do I make a change to my policy?

If you want to change anything on your policy such as your address or add another driver to it, you need to tell your insurer so they can update their records. Your insurance company may make an administration charge for changes to insurance policies, and your premium may change depending on what change you are making.

For example, moving house from a rural area to an inner city area may increase your premium because your insurer’s statistics could show more claims are made in these areas, so the risk to them of insuring your car has increased (it would cost them more if you make a claim).

Some insurers have an online service so you can make changes to your policy yourself, alternatively you need to phone their Customer Services department as soon as possible.

Remember! You must tell your insurance company if your details have changed as they may not pay out on a claim if you don’t.

What if I want to cancel my policy before it has ended?

Your insurer may charge you if you want to cancel your policy before it is due to end. There may be a cancellation fee to pay as well as a percentage of your premium. Your insurer’s cancellation rates can usually be found in your policy booklet. You will need to phone your insurer to cancel your policy.

How do I make a claim on my policy?

If you have an accident or your car is stolen, you need to tell your insurance company as soon as you can. If you have an accident but are not claiming, you still need to tell your insurer.

Your insurer will then take the details of your claim and if your car needs repairing they will tell you who their approved repairers are in your area (an approved repairer is a garage that your insurer has a contract with to repair vehicles on their behalf), and arrange for it to be repaired.

Policies available for single-parent families

Cover for a variety of destinations means you don’t pay for more cover than you need (UK,
Europe, Worldwide with or without the Caribbean and the USA)

3 day short trip/city break cover available

UK holidays can be covered

Family cover can include two adults and up to 4 dependent children

Couple cover includes same sex partners

Optional extra cover for winter sports, golfing holidays, business trips and weddings

Choice of cover and destinations

Baggage cover included as standard

Cover for individuals, couples, single parent families and families available

Online prices start from:

• £6.64 for three days cover in the UK
• £28.49 for 10 days in Europe for a couple
• £42.74 for annual cover for an individual traveling in Europe

When you take out a car insurance policy, you will be offered a choice of three main levels of cover.

Third party: the minimum type of motor insurance you can take out is “third party”. This covers liability for:

* Injuries to other people, including passengers
* Damage to other people`s property
* Passengers for accidents caused by them
* Arising from the use of caravan or trailer while attached to the car.

TIP: Third party cover is OK for people who cannot afford a better type of car insurance.

It may make sense if you are driving an old banger where almost any repair would cost more than the car is worth, or where its replacement might only cost a couple of hundred pounds at most.

But if your car costs more to replace, you need to consider something better.

Third party, fire and theft: the next step up is “third party, fire and theft”, sometimes written as TPFT. This provides the above cover, plus fire or theft of the vehicle. If you are at fault in the event of an accident, TPFT will not pay for repairs to your car.

TIP: TPFT cover is useful for those whose car is not worth much – but would still cost more to replace than the cost of excesses. It can also be useful for younger drivers who might find fully comprehensive policies very costly, those who only drive occasionally or have minimal no-claims bonuses.

But it is generally unsuitable for regular drivers, or those with expensive cars.

Fully comprehensive: this is the most complete form of car insurance and protects against the above, plus:

* Accidental damage to your car
* Personal accident benefit
* Medical expenses
* Loss of or damage to personal effects in the car

TIP: Not all “fully comp” insurance is the same. Although all insurers will cover off the basics, many will offer additional variants on their policies, such as courtesy cars in the event of theft, breakdown or accident, or protected no-claims bonuses.

You may also want free cover for driving in Europ

Car Insurance Guide
Car Insurance

Our guide to car insurance contains all you need to know about finding the right type of motor insurance policy, how to lower the cost of your premium and what to do in the event of a claim.

If you want to go directly to another section of our guide to car insurance, you can click on one of the links below:
What kind of motor insurance do you need?
What drives the cost of car insurance
How your car insurance quote is set
Where does my money go?
Where to go for your car insurance
What you need before applying for car insurance
How to cut the cost of your car insurance
Other ways of cutting your car insurance bill
How to make a car insurance claim
What happens if a claim is rejected?
Motor insurance jargon buster
How to get the best car insurance deal

Car insurance is almost certainly the financial product most commonly held by consumers in the UK, with the possible exception of a bank or savings account. This is hardly surprising: if you drive a vehicle, insurance is compulsory.

In theory, this ought to make everyone a car insurance expert, able to get the best deal on their motor cover.

Yet too many of us tend to stick with the same insurer for too long and end up paying hundreds of pounds more a year than we need to. We only change policies when premiums become very noticeably too dear.

Conversely, we pat ourselves on the back because we have found ultra-cheap car insurance – only to discover that when we make a claim, certain items were never covered under the terms of that policy.

Shopping around is the starting point for anyone who wants the best car insurance deal. Our car insurance comparison tool allows you to search for and compare quotes from more than 60 top insurers and brokers in the UK.

But knowing how motor insurance works can help you get an even better deal – not just on price but in terms of the service you may need from your insurer. This guide is designed to help you achieve that.

It tries to answer some of the most typical concerns of motorists: everything from explaining how your quote is set and tips on how to cut the cost of your cover, to the various steps involved in making a claim.

We also offer a jargon-buster – explaining some of the more typical terms used when taking out car insurance.

Of course, no guide can ever attempt to answer every query. If you have any further questions, feel free to visit the Car Insurance or Motoring sections in our Forums, where one of our experts – or even other forum members – will do their best to help.