It’s legally required to insure your car but with all that’s on offer – and the terminology! – the process can get a bit daunting. Here, we explain all you need to know about car insurance – what is it, what can you get with it and who’s running it?
What is car insurance?
Let’s strip it down: car insurance is a policy that (depending on the provider you choose) covers you and your car, and the damage you might cause to other drivers and their cars in an accident.
It’s very easy to get insured and usually, you can start your policy and drive your car protected on the same day. Be wary of potential ghost brokers and insurance scams that often operate on social channels. With drive like a girl you can only get a quote online, by calling us or through one of the price comparison sites.
You’ll be quoted on various elements, like your driving history, the type of car you drive and how many miles you think you’ll drive. With most insurers, you can also add ‘named drivers’ so that if you share your car with your sibling, for example, they’ll be insured too.
What types of car insurance can I get?
Comprehensive car insurance is a policy that covers you, your car, the passengers as well as damage to anyone else’s car. As the most comprehensive cover, it’s the ‘easy-to-understand full package’ but you should still check if it includes things like Personal Accident cover (for death or injury) or legal expenses cover.
Third Party Only (TPO) policy covers damage to any third party – this refers to your passengers, other drivers and their cars as well as pedestrians and third party property – but it won’t protect you and your car. It’s the lowest level of cover there is on offer.
Third Party, fire and theft (TPF&T) is a level up from Third Party. In addition to covering all third parties and their property, this policy also covers your car if it’s stolen or catches fire.
What car insurance terminology do I need to know?
Premium is simply the price of your car insurance policy. As said, there are multiple factors that define how much your cover is going to cost you.
It can be tricky to find your first car insurance policy at a price you’re expecting, as a lack of years of driving experience can set new drivers back. This is one of the reasons why telematics, or black box insurance, is on the rise for young drivers as it can help you show your individual driving style.
Excess is what you pay when you make a claim. The amount of your excess is defined when you start your policy. It consists of a compulsory amount, which can’t be changed, and a voluntary amount that you can select for a discount on your premium.
To explain it better: if your claim is worth £800 and your excess is £150, your insurer will only pay a maximum £650 to you (if it’s a total loss). So if you can afford to pay a bigger excess, your insurance can technically end up being cheaper.
Exclusions specify different conditions that have an impact on claims made on the policy. You might be paying your premium but still have your claim rejected because you’ve accidentally voided your cover.
They could be things like driving under the influence of alcohol or drugs, modifying your car (without informing your insurer), driving a car that isn’t in a driveable condition or practising motorsports. These exclusions are laid out in your car insurance policy, so it’s important you understand them to avoid surprises if you need to make a claim.
A No-Claim Discount (NCD) is a discount most insurers offer if you haven’t made a claim for a certain amount of time. When you renew your policy, if you went through the year without a claim, you could get a discount.
Who provides car insurance?
The financial services industry isn’t easy to understand but in car insurance there are three key players that you should know of.
Underwriters are the ones who decide if you get a policy with the insurer or not. They analyse the exposure of potential policyholders and evaluate everyone’s individual risk so that they can decide how much the insurance should cost.
Basically, they’re the ones who make sure the insurance company isn’t losing money because of high risk. Most insurers do this automatically using technology, but sometimes it’s all done by agents. It’s also quite common that another company does the underwriting for another brand.
Aggregators are comparison websites that give you a variety of different policies available so that you can choose the most suitable provider. Aggregators, like GoCompare and MoneySuperMarket, take your information, run it against different car insurance providers and provide you with multiple quotes.
When you find a quote that interests you, and accept it on the aggregator site, it’ll send your profile to the insurer so they can go through the initial underwriting process and contact you directly. This is how most people buy their car insurance policy nowadays.
Brokers are specialists who work as middlemen (or women) to find the most suitable services on behalf of the buyer. They’re required to present to you the best deals after in-depth research on the market and all potential providers.
They can save you the hassle of browsing through comparison sites and having to do your own research, as well as assist you with claims you make. They do charge commission charged to you in your premium or separate fees.