Motor Trade Insurance Guide 1). Introduction Are you in a motor trade? Are you thinking about becoming involved in a motor trade? Are you new to the motor trade business? If you’ve answered yes to these questions, then you’ve come to the right place. Anyone involved...
GUIDE TO UK CAR INSURANCE
Car insurance is required by law in the UK for anyone who drives a car and it is intended to cover the costs of any driving related damage or injuries. It is a legal offence to use a car, or allow others to use it, without suitable insurance whilst driving on a public road (no such legislation applies to vehicles used on private land). Certain vehicles such as some of those used by local authorities, police and fire services do not require insurance.
For an explanation of some of the terminology used in the insurance industry, see the section at the end of this car insurance guide.
WHAT HAPPENS IF A DRIVER DOESN’T HAVE CAR INSURANCE?
Failure to have car insurance could result in a fine or being sent to prison. Convicted drivers could also be banned from driving and have their cars confiscated and scrapped.
WHAT DOES CAR INSURANCE ACTUALLY PROVIDE?
Car insurance provides financial protection against damage resulting from traffic collisions or accidents or liability resulting from accidents. It can also provide cover in the event of a car being stolen.
DOES INSURANCE COVER THE CAR OR THE DRIVER?
Car insurance is linked to the car itself rather than covering a driver to drive any car. If you drive someone else’s car you should ensure that you are covered by their policy. In some circumstances your own policy may provide Third Party cover for you when you drive other people’s cars but you should check your existing policy to confirm this.
WHAT TYPES OF CAR INSURANCE ARE AVAILABLE?
There are three types of car insurance available from more than 100 different UK insurance companies. These are:
THIRD PARTY ONLY. This is the minimum level of insurance cover that is required by law in the UK. It covers:
- Liability for injury to others (including passengers)
- Damage to property, including other vehicles, resulting from an accident caused by you
- Liability whilst towing a caravan or trail
Note that it does not cover you for accidental fire or theft damage to your own vehicle.
THIRD PARTY FIRE AND THEFT. This provides the same coverage as Third Party Only Insurance but also provides the following cover:
- Fire damage
- The theft of your own vehicle
- Damage to your car as a result of its theft.
COMPREHENSIVE INSURANCE. This is the most extensive motor insurance cover and provides for everything covered by Third Party Fire And Theft insurance as well as a number of additional benefits. These usually include:
- Loss or damage to your vehicle
- Windscreen cover
- Personal effects cover
- Accidental damage
- Medical expenses
HOW MUCH DOES CAR INSURANCE COST?
There are a number of factors that contribute to the cost of car insurance and these are used by insurers to calculate how likely someone is to make a claim on their policy – the “risk” that the insurer will be taking on the driver. Because no two risks are the same you will need to provide information in the following areas to insurers before they can give you an accurate quote:
- Basic personal information such as gender, age and marital status
- Your address, postcode and home ownership status
- Information regarding your car (make, model, age, date of purchase, value, security, type of use)
- Information regarding your occupation
- Information regarding your driving (annual mileage, type of licence, dates and details of any motoring convictions, accidents and claims made, level of no claims bonus)
- Information regarding any other drivers to be included on the policy, including their driving history
- Type of policy required and level of voluntary excess
- Any relevant medical conditions
- Any previous history of having been rejected for insurance cover
When shopping for car insurance you will need to have all of this information to hand. Car insurance is usually valid for a 12 month period and most insurers allow you to pay by either a single, annual payment (or premium) or in monthly instalments. Note that payment by monthly instalments is usually subject to an interest charge. Insurers will usually provide a quote up to one month before the car insurance is due to start.
It is essential that the details you use to obtain your car insurance policy are correct. If you supply incorrect information or fail to declare information your policy could be invalidated, meaning that the insurer may not pay any claim that you subsequently make. For this reason you should always inform your insurer if any of your details (such as address or car usage) change.
HOW CAN THE COST OF INSURANCE BE REDUCED?
There are a number of ways to reduce the cost of your car insurance, although some of these (type of cover, level of voluntary excess) will directly impact on the type of claims that can be made on the policy and the amount that may be paid. Here are some areas to consider:
- The UK has over 100 insurers to choose from – prices vary and so it pays to SHOP AROUND. When you do this, make sure that when comparing policies you do so on a like-for-like basis in terms of type of cover, level of excess, what’s included in the policy, etc.
- SMALLER CARS tend to have smaller insurance premiums – consider this when buying your car by checking which insurance group the car is in (the lower the group, the cheaper your insurance cover should be).
- Cars that have been MODIFIED in some way tend to cost more to insure.
- If you can reduce your ANNUAL MILEAGE you could reduce the cost of your insurance.
- For younger drivers an additional driving qualification called PASS PLUS taken after passing the driving test can reduce premiums by up to 35% in some cases.
- Fitting your car with additional, approved SECURITY DEVICES may lead to cheaper car insurance. Similarly, keeping your car in a GARAGE overnight should also help reduce costs.
- You can choose to increase your VOLUNTARY EXCESS in return for a reduction in your annual premium – so you agree to a higher excess level (the amount that you will pay in the event of a claim).
- Having more than one ADDITIONAL DRIVER on your policy may result in higher insurance costs.
- Having DRIVERS UNDER 25 on your policy may also increase your costs.
- Consider whether a different TYPE OF COVER would be acceptable for your needs – for older cars Third Party or Third Party Fire & Theft may be a suitable (and cheaper) alternatives to having Fully Comprehensive cover.
- The best way to reduce your insurance costs is to maximise your NO CLAIMS BONUS discount.
Remember that not all policies are the same and when comparing insurers it is important that you look at all aspects of a policy and not just its price. Some insurers, for example, may offer access to a courtesy car as part of a policy or include windscreen cover as standard, whereas others may charge extra for these. The best price comparison sites like MyMoneyComparison.com offer easy and comprehensive “like-with-like” policy comparisons as well as the facility to amend quotes to look at different excess levels and types of cover.
HOW CAN YOU BUY CAR INSURANCE?
With over 100 UK insurance companies it pays to shop around. There are several ways to do this.
- Approach individual insurance companies, online or over the phone, one at a time and give them all of your details to get a quote.
- Visit a high street insurance broker or contact a broker over the phone, give them can your details and they will use their own panel of insurers to get you a quote.
- Use an insurance price comparison site like MyMoneyComparison.com to access quotes from up to 70 insurers, filling in just one form and using their side-by-side quote comparison service to choose the best policy for you. You can easily amend quotes as well as saving them to return to at a later date.
WHAT HAPPENS AFTER BUYING A CAR INSURANCE POLICY?
After you have bought your policy you will be sent documentation that will include your certificate of insurance (or a cover note that will act as a temporary certificate) as well as a policy schedule and further information setting out terms and conditions. It is important to read these and to immediately contact the insurer if any of the details are incorrect. The insurer may require you to send them further information (such as proof of the level of No Claims Bonus from a previous insurer) and a copy of your driving licence before your policy is fully validated.
If your CIRCUMSTANCES CHANGE (address, etc) then you should notify your insurer. Note that this may result in an increase to the amount that you pay for your insurance. In some cases an additional administration charge may also be payable (check your policy terms and conditions for details). Any driving convictions need to be notified to insurers at the date of policy renewal.
If you wish to CANCEL YOUR POLICY at any time during the term of your insurance then you should contact your insurer who may charge a cancellation fee (check your policy terms and conditions for details).
If you have an ACCIDENT OR YOUR CAR IS STOLEN, tell your insurer as soon as possible, even if you do not intend to make a claim on your insurance policy. Your insurer will then instruct you as to what to do, including where to get any repair work undertaken.
Towards the end of your policy’s term (usually 12 months) you will usually receive notification from your insurer that the policy requires renewal and this will normally indicate a renewal price. In order to get the best price for your car insurance it is worth shopping around for comparative quotes using a price comparison site like MyMoneyComparison.com
WHAT OPTIONAL EXTRAS CAN BE BOUGHT WITH CAR INSURANCE POLICIES?
As not all car insurance policies are the same you should always check what’s included in the quote you have been given before you buy a policy. Insurers will usually offer you the opportunity to buy extra cover along with your policy and the most common of these are:
- LEGAL PROTECTION. This would pay or help to pay for any legal costs arising from an accident that happens while you are driving.
- BREAKDOWN COVER. This cover helps to get your car running in the event of a breakdown, either at the roadside or by taking your car to a garage. Levels of cover vary so it is important to look at what’s covered and what’s not.
- COURTESY CAR COVER. This provides you with a temporary replacement car in the event of your own car requiring repair after an accident.
- PERSONAL ACCIDENT COVER. This cover provides a payment in case you or your passengers are injured or killed as a result of a road accident. Again levels of cover vary and so policy details should be checked and compared.
- DRIVING ABROAD. Many policies will allow you to take your car abroad for a limited time at no additional cost but some may require you to pay an additional premium to allow this.
- WINDSCREEN COVER. Again this is included in many comprehensive policies but other may require an additional payment. This covers windscreen replacement or repair to chips or cracks in your windscreen.
SOME CAR INSURANCE TERMS EXPLAINED
CLAIM. When a policyholder seeks payment or settlement under the terms of a policy.
- FAULT CLAIM. A fault claim is a claim where the policy holder’s insurance company is not able to recover all of the costs from another party, usually because the claim has been deemed to have resulted from the actions of the policyholder. Fire or theft claims are considered as fault claims unless any such payments are recovered by the insurer from the other party.
- NON FAULT CLAIM. A non-fault claim results in the insurance company recovering all the costs associated with a claim from the other party, because the claim is deemed to have resulted from the actions of a third party.
EXCESS. An excess is the amount that you are liable to pay towards any claim that is made on your insurance policy. For example, you may have a total excess (the sum of your compulsory and voluntary excess levels) of £300. If the cost of repairing accidental damage caused to your car is £750, then you will have to pay the excess (£300) and your insurer should cover the remaining £450.
- COMPULSORY EXCESS. This is the excess amount set by the insurance company. It may depend on the details you provide to them in your application. Higher excesses are more likely for younger drivers or those with more expensive cars.
- VOLUNTARY EXCESS. When you take out a car insurance policy you can select a level of voluntary excess that will then be added to the insurer’s compulsory excess. The higher the voluntary excess level that you choose, the lower the price of your policy.
INSURANCE PREMIUM TAX. A tax imposed on car insurance and on most non-life insurance premiums. From January 1st 2011 this is 6% of the cost of the policy. Most insurers will include this in policy prices. Note that there is no VAT payable on car insurance premiums.
NO CLAIMS BONUS (NCB). This is a discount given to drivers who do not make a claim on their car insurance policy. In general for each claim that you make you lose 2 years’ worth of bonus.
- PROTECTED NO CLAIMS BONUS. It is possible to build in protection for your no claims bonus once you have achieved the maximum discount level (normally 4 or 5 years). This means that the No Claims Bonus discount will be retained even in the event of a claim being made. Different insurers may have different conditions as to the number of claims that can be made.
POLICY. The document providing full details of the contract between the insurer and the policyholder.
POLICYHOLDER. The person (or organization) to which the insurer issues the policy. Normally this is the person to whom benefits are payable in the event of a valid claim.
PREMIUM. The amount paid by the policyholder for insurance.
TERM. The period of time for which a policy is in force.
Be sure to shop around and compare car insurance and get the best deal possible, even if your car has a high insurance group rating! If you would like to understand in how Insurance Groups work then read the MyMoneyComparison guide to Car Insurance Groups.