A Guide to Car Motor Insurance

Finding car insurance can be a daunting task, where do you begin and with so many companies how do you know which is the best one for you? The following information will guide you through some of the queries you may have about car insurance for you next used car.

What you need to know about Car Insurance

Each insurance company has a team of underwriters who underwrite any costs the company may have to pay out due to an insurance claim. Underwriters have a huge range of statistics which they use to calculate the cost of insuring a specific vehicle for a specific individual.

The cost of car insurance is mainly dependent upon the following:

The value, make and model of your car – if your car is worth £30,000 then you can expect to pay a higher premium than someone driving a car worth £4,000. Also some cars are cheaper to repair than others due to availability of parts, specialist body-shops for more specialist cars etc. Each of these factors plays a role in determining the cost of your motor insurance policy. New or used cars should not make a difference, simply the car valuation is important.

Engine size - More powerful cars are more likely to be involved in high speed accidents and these generally cost more to repair than lower speed accidents.

No Claims Bonus – For every year you insure your car and do not make a claim on your policy you receive a "no claims bonus". This can mean a discount of up to 70% off the cost of your insurance as long as you remain claim and accident free for five years. So the more no claims bonus you have, the cheaper the cost of the insurance.

A protected no claims bonus – in case an accident occurs you do not lose your no claims bonus. This will initially cost more but in most cases it is a valuable sum to pay. A 40% no claims bonus on a motor insurance policy costing £2,000 before discount, is worth an £800 per annum saving. So a small additional premium of £50 to protect your no claims bonus is often a good investment.

Insurance Group – Most cars are given an insurance group ranking – this is the level of associated risk with a particular car type and group as decided by the motor industry. This is often based purely on the likely repair costs. For example group 20 is the highest possible risk and is for high-powered cars, whereas a group 4 car such as a small hatchback is the lower end of the risk scale and is therefore a cheaper car to get insurance cover on. Your dealer will be able to advise you of the insurance group for the car you are interested in.

Age - Younger and less experienced drivers are more likely have an accident and make a claim. Your motoring history – as you will expect someone who has had previous accidents, speeding fines or penalty points will pay a higher premium that someone who has a clean licence.

Your occupation – what you do for a living and your annual mileage can make you a higher risk. For example someone who rarely uses their car through the week would be a lower risk than someone who covers a lot of miles for their job.

Where you live – this can dictate whether you are more or less likely to have an accident due to the volume of traffic for your area. Theft and break-ins to car are more common in certain towns and cities. Obviously factors such as having your car being garaged overnight will reduce your insurance.

The excess charge – All policies have a compulsory excess. An excess is the amount that you are responsible for if you make a claim on your policy. For example if you have an excess of £500 and your repair bill was £2000, you would be responsible for paying the first £500 and the insurance company would pay the remaining £1500, however if your repair bill was £300 you would not be able to make a claim as the claim amount is lower than the excess amount. Having a larger excess can reduce the cost of your policy as this means the insurance company will have to pay out less in the event of an accident.

Voluntary excess – is over and above the amount of the compulsory excess but works in exactly the same way. So if your policy has a £100 excess charge and you agree to a voluntary excess of £300, in the event of a claim you have to pay the first £400 and the insurance company will pay the remaining balance.

Car security (alarms, immobilisers etc) - If you have fitted a car alarm and immobiliser it is less likely that your car will be stolen - you can therefore expect to pay less for your motor insurance policy than someone who has no security device on their car.

Benefits included in your motor insurance policy – Some insurance companies will offer you the use of a courtesy car if your car is off the road.

What different types of cover are available?

Third Party Only Car Insurance covers the policyholder against damage to a third party's property or to the third party themselves. Basically if you are to blame for the accident, you will not be covered for damage to your vehicle or for your own medical expenses but the other parties, ie the person you have bumped into or a passenger in your car can make a claim. If your vehicle is stolen or catches fire, a Third Party Only policy will not entitle you to make a claim towards the cost of theft or repair of the vehicle.

Third Party Fire & Theft Car Insurance Cover is exactly the same as the Third Party Only policy above, however a Third Party Fire and Theft you can make a claim on your policy if your vehicle is stolen or set on fire.

Comprehensive Car Insurance Cover – is also known as fully comp and in addition to paying out for third party fire and theft – see above - will also pay out for your own repairs or medical expenses regardless of who is to blame.

Which cover should you get?

There is no definite answer to this as everyone’s circumstances are different but here are some guidelines.

Younger drivers For the teenage motorist who will tend to have a less expensive car it is likely their insurance will be very high. For example is a 17yr old who purchases a second-hand car for £1,000 would pay a comprehensive policy of up to £2,500. For a Third Party Fire & Theft policy this may be reduced to approximately £1,700. However they would not be covered if the accident was their fault for the cost of repairs to their own vehicle or medical expenses. If it was not their fault the other driver's policy will pay for repairs or offer a replacement value of your car (if it cannot be economically repaired).

Being fully comp is the most sensible option for younger drivers who have a more expensive car. £2,500 for a Comprehensive policy can be money well spent if an accident is your fault and your car is worth £7,500. Being fully comp means any repairs will be paid for or a cash sum or replacement car of similar age and mileage will be supplied to you.

For good drivers over the age of 25 the cost of comprehensive cover will drop considerably and is more often than not the best option so should be carefully looked into.

Remember when searching for quotes to get a good range using price comparison sites and shopping around. Always ask for Third Party Fire & Theft terms as well as Comprehensive terms. This will allow to you to see the best option for you and your needs.

Additional information

Motor insurance is a legal requirement – an insurance policy provides you with cover and peace of mind against potentially very high costs, if you were to cause an accident that resulted in the loss of life or permanent injury to other people the cost of the claim could run into millions. Legally you cannot drive a motor vehicle without a valid motor insurance policy.

Your motor insurance Certificate and Policy - Your motor insurance certificate is often a "shortened" one-page document and is normally accompanied by your insurance policy document. It is important you understand your policy as there are many variations, for example drivers under 25 may not be insured on your car so take the time to read it and ensure the conditions you have specified are met.

Proposal Forms - written and verbal - When you arrange your motor insurance you will either: complete and sign a written Proposal Form; or you will complete the Proposal Form over the telephone in which case the telephone call will be recorded and can be replayed if required. Each of the questions that you answer at the Proposal Form stage is the basis of the insurance contract. It is imperative you answer these questions correctly and honestly, failure to do so could result in your policy being void if you were to have an accident.

The value of your car – all cars depreciate so you must remember the amount that your policy is worth is not necessarily the amount you will receive should something happen to your car. In addition, you may have paid full price for your car a few years ago yet the cost of a similar car today may be greatly reduced. Most Insurance Companies will now try and find you a replacement car, with similar age and mileage to your own car, and supply it directly to you rather than settle a cash amount upon you.

Multiple policy discounts - Many Insurance Companies will offer you a discount if you have more than one policy with them.

Remember to shop around and get the best cover at the best price, there are over one hundred companies out there, all trying to make a profit out of motor insurance - and each of them will have a different set of underwriting criteria, such that what may be deemed to be a poor (and high cost) risk to one insurance company may be seen as an acceptable (and low cost) risk to another insurance company

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