FOOL SCHOOL
Car Insurance Basics

August 7, 2002

So you have bought your dream car, but before you can legally drive it on the road there is one more hurdle that you have to jump -- you have to insure it. Buying insurance is a necessary evil for two reasons. First you have to by law, and second if you have an accident you need to be able to pay for all of the damage and mayhem that you have caused.

Insuring your car can be a real pain. Getting the right combination of the best insurance for you at the lowest possible price 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 most important thing is to get the right cover for you without cutting corners, and don't 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.

Basically you have three choices. You can opt for the legal minimum of third party only, you can add in protection against fire and theft or you can go the whole hog and opt for fully comprehensive.

Third Party Only

Third party only is the cheapest form of insurance that you can buy, and it will protect other people if you happen to smash into them. This is the minimum form of insurance that is required to allow you to drive legally on the roads of the UK. Any damage to your own car that has been caused by your own 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 then you will not be able to claim.

Third Party, Fire and Theft

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 a replacement vehicle to the value of your old one.

Fully Comprehensive

Most people take out fully comprehensive 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 the age of your car, 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. Why pay over the odds for a car that is only worth £500?

> Get a quote in the Fool's new Insurance Centre