A Guide To Car Insurance

Car insurance is not just a legal necessity, it’s also there to help – if you are involved in an accident it could assist you in covering the cost of damages and injuries depending on the level of cover you have in place.

So how does car insurance work and what should you look for from a policy if you’re a new driver? We’ll explain.

How does car insurance work?

Broadly, there are three car insurance options to choose from:

- Third party only: Covers liability for injuries to others, damage to their property and liability while towing a caravan or trailer.

- Third party, fire and theft cover: Same as third party only cover but adds protection for your own vehicle from theft, attempted theft and fire damage.

- Comprehensive cover: Policies vary between insurers but typically include everything in third party, fire and theft cover plus repairs to your own vehicle in the event of an accident, as well as additional features such as accidental damage cover, windscreen cover and personal accident cover. Optional extras may also be available for an additional premium – such as legal expenses cover, breakdown cover and cover while driving overseas.

Insurers assess premiums based on risk – i.e. the more likely you are to make a claim, the higher your premiums will be. Factors they consider include: your driving history; your address (such as whether you live in a high crime or busy traffic area); your personal circumstances, including whether you are married and your occupation; your annual mileage; and the vehicle itself.

When shopping around it’s important to consider both the levels of cover available and the premium to ensure you’re receiving value for money. Also remember to factor in the excess – this is your contribution towards a claim; and whether or not the company offers a no-claims bonus, which rewards drivers for avoiding claims and could be worth as much as 60 per cent off premiums after four or more years.

What if you’re a young driver?

If you’re a young driver then you may find it more difficult to get a competitive premium. This is because accident rates are high among young motorists with the Driving Standards Agency reporting in 2008 that while only one in eight car licence holders is under the age of 25, motorists in this age group account for one in three drivers killed on the UK’s roads. It is also reported that one in five new drivers is involved in an accident within six months of passing their driving test.

However, there are ways to bring premiums down. Here are some tips:

- Avoid modifications: Modifications to a car (unless they are safety or security features) will usually cause premiums to increase because they make the vehicle more expensive for insurers to repair/replace.

- Research before you buy: Before you purchase a vehicle you should use the Association of British Insurer’s database to find out which car insurance group the vehicle falls into. The database ranks vehicles into groups from 1 – 50 (previously 1 – 20) with those in higher groups attracting higher premiums.  In order to keep premiums down it is best to pick a car with a small engine that falls into a low insurance group.

- Choose the right level of insurance: Third party only cover may not offer the level of protection that you get from a comprehensive deal but it could be worth considering if premiums for comprehensive deals are out of your price range. If you do opt for comprehensive cover think about the policy options you need – for example don’t pay for “business use” of a car if you only use it for social purposes.

- Increase security: Adding security devices to a car, such as alarms, immobilisers and trackers, limits the risk of theft and will usually earn a discount from an insurer depending on the equipment you choose. Also park your car in a locked garage overnight to keep it away from thieves and vandals.

- Increase your excess: Selecting a higher voluntary excess will generally lower premiums although it should only be kept at a level you can comfortably afford.

- Learner driver policies: If you don’t yet have a car of your own and are simply learning to drive with a provisional licence then consider a learner driver policy which will cover you during your tuition period but won’t tie you into a long-term contract.

- Look for rapid bonus schemes: Several insurance companies offer rapid bonus schemes to young drivers that allow them to earn a full year’s discount in less than 12 months.

- Pay annually: By paying car insurance premiums upfront you could avoid monthly interest charges.

- Shop around: Use a comparison website to compare deals from more than 100 insurers to ensure you’re getting value for money.

- Take the Pass Plus course: The Pass Plus is an advanced driving course consisting of six modules that offer new drivers additional experience in unfamiliar driving situations such as city driving, driving at night and driving on the motorway. Completing the course could save as much as 35 per cent on your premiums with some insurers and financial assistance for the course may be available from your local authority.

Regardless of which policy you choose when you first take out car insurance, remember that premiums typically drop significantly once you have completed 12 months of driving without making a claim. So note down your renewal date and shop around again to ensure you’re still receiving a competitive deal.