Insurance: Car Insurance

Insuring your car can be a real pain. Getting the right combination of cheap car insurance with good policy terms for you can take time and effort, but with some careful planning and some time on the Internet or telephone you can save yourself lots of your hard-earned money.

The two most important things are to get the right car insurance cover without cutting corners, and to not try and reduce the premium by forgetting to tell them about that speeding fine you have or pretending you are older than you are. If the worse did come to the worse and you have an accident then the insurance company could invalidate the insurance if they find that you didn't tell the whole truth.

You normally have three choices. For real budget car insurance you can opt for the very basic third-party only cover. Next up you can add in protection against fire and theft. Finally, you can go the whole hog and opt for fully comprehensive.

Option 1: Third-party only cover

'Third-party only' is the most basic form of motor insurance that insurers are usually willing to sell. It protects other people if you happen to smash into them. Any damage to your own car that has been caused by your poor driving is not covered unless you can prove that someone else was at fault, in which case you will then have to claim off their insurance cover. If your car is destroyed in a fire or is taken for a joy ride never to be seen again you will not be able to claim.

Option 2: Third party, fire and theft cover

This adds in protection in case the car is stolen or catches fire. So if joy riders steal your car or set it on fire, you're covered for its cash value.

Option 3: Fully comprehensive cover

Most people take out fully comprehensive car insurance, particularly on new vehicles as it means that no matter who was to blame in an accident your insurance company will pay out for the costs of repairs. Depending on how much your car is worth, this can be the best form of car insurance and, even though it will cost a little bit more, it will bring peace of mind. However, if you're more inclined towards driving old bangers around, fully comprehensive insurance is probably a waste of money.

The policy excess

When you make a claim (but not when other people make a claim against you) you have to pay the first part of it. This is called the policy excess. Typically you'll pay £100 to £150 for damage, fire and theft, and £60 for windscreen claims, although on some policies it can be a darn sight more!

If you have more than a third-party only policy, don't sign up till you've checked how much the policy excesses are for each section: damage, fire and theft. Sometimes even third-party only policies still cover you for windscreen damage, so take this into account when you're buying.

If they ask if you want to add a voluntary excess to reduce your premium, remember that this will be in addition to the compulsory excess, which will probably be at least £100.

The no claims bonus

No claims bonuses are straight forward: you get a larger discount the longer you haven't claimed on your car insurance policy, usually up to five years. If you have five years no claims and then you make a claim, you're bonus is usually stepped back to four years when you renew your insurance. If you have four years or less and you make a claim, your bonus is usually reduced by two years.

When you have five (or sometimes just four) years no claims, you can protect your no claims bonus. It will cost you a bit more, but it means you're allowed some 'free' claims before you lose any bonus. Typically, two claims are allowed on a car insurance policy in a three to five-year period.

Don't protect your bonus unless you have to. Many people make the mistake of buying a protected bonus when they've already had too many claims in recent years. Therefore their next claim will reduce their bonus anyway. If you've had a claim or two, check the small print.

If you protect your bonus and you have a claim, your car insurance premium is still likely to go up next year, although not by as much. This is because the insurer will add the claim to your risk before deducting the discount.

Don't assume you're allowed to drive other people's cars

Many people assume that if they have comprehensive car insurance then they are automatically covered to drive other people's cars. This is not always the case. Some insurers no longer offer this cover and those that do don't offer it to everyone. The only way to know is to check your insurance certificate, which will state clearly if you have it.

One more thing to beware of is that the 'driving other cars' extension gives you just the basic insurance cover allowed by law. This is called Road Traffic Act cover, which is even less than third-party only insurance. The nub of this is, if you have an expensive accident whilst driving someone else's car, you may end up being liable for part of the other party's claim!

Also, when you park a car driven on this extension and walk away, it is no longer insured at all, which means you cannot claim for damage, fire or theft. At least, not until a named driver on the policy takes control of the vehicle again. Therefore you should use this extension as a last resort.

Whilst you're at it, don't make any other assumptions either!

Although the three main types of car insurance are generally defined in the same way, there are lots of terms and conditions that vary from insurer to insurer. For example, even if you have comprehensive car insurance cover, you may not be:

• Covered for windscreen damage.
• Entitled to a courtesy car.
• Covered to drive in the EU automatically under your full policy conditions (although you get Road Traffic Act cover automatically in the EU and a few other countries).

Or you may be:

• Limited to just one or two windscreen claims each year.
  
  
• Allowed a courtesy car for just fourteen days per claim.
  
  
• Entitled to just 30 days full cover in Europe over the whole year.

Bear in mind that most insurers require that you give them advanced notice before driving abroad. It goes to show that reading the small print is certainly worth it.

Understand the cover that's included - a checklist

The policy might be cheaper, but that doesn't mean it has everything you want. Use this list of questions to check you're getting the right car insurance cover:

• Is the car insurance comprehensive, third party, fire and theft, or third-party only?
  
  
• What is the total policy excess in the event of claims? What about the excess for windscreen claims?
  
  
• Does the insurance policy cover all the drivers I asked for?
  
  
• Does the insurance cover include legal expenses and breakdown?
  
  
• Does the insurance policy include a courtesy car? (Note that not all comprehensive policies include these by default.)
  
  
• Can I make an unlimited number of windscreen claims?
  
  
• How many windscreen claims can I make before it affects my no claims bonus?
  
  
• Is the full car insurance cover extended to driving in Europe for the period I asked for?
  
  
• Is the no claims bonus protected?

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Published on December 8, 2006