A buyers guide to car insurance

As a driver or owner of a car, lorry, motorbike or any other type of road vehicle, by law you are required to be insured. The world of car insurance is a daunting place. There are thousands of different policies and deals to choose from, and to be fair it's not easy to know how to go about finding the best deal for you - and at a price that won't require a second mortgage!

At Groovy Insurance we aim to explain some of the ins and outs of car insurance, and the advantages of obtaining simple impartial and expert advice.

Third Party (Fire And Theft) Insurance

'Third Party Only' is the minimum cover you can buy and required by law to legally drive a vehicle. Third Party covers you if you injure someone else or damage their property, but be mindful that very few insurance companies will sell you this cover on its own.

The next level of insurance is Third Party Fire and Theft. Fire and Theft includes protection against your vehicle being lost, damaged, burnt or stolen. However this cover does not protect you against damage to your vehicle if you're involved in an accident, or if it is vandalised.

Comprehensive Insurance

Comprehensive insurance is the complete package so to speak. It covers damage to your vehicle from a much larger range of causes, including accidents, fire and theft. Other advantages often include limited cover for items stolen from your vehicle, medical expenses, breakdown cover and personal accident protection. Be sure to investigate the full range of advantages open to you from the policy before purchasing. A lot of comprehensive cover policies will allow you to add the additional services at a greater cost, typical additional services or freebies may including:

Beware though that the word 'comprehensive' can be misleading as these policies always include limitations and exclusions. So, it may be boring, but make sure you read the small print!

Uninsured Loss Recovery (ULR)

This provides you 'the policy holder' with cover for legal costs to pay for a solicitor in order to recover your uninsured losses from a guilty/negligent third party. This would include things like policy excesses, personal injury claims, hire car charges and any other expenses you have had to pay for which were caused by the third party negligence. Usually the ULR wil provide cover for free personal 24 hr legal advice.

ULR is especially useful for Third Party Fire & Theft policy holders as it will attempt to recover from a negligent third party, not only the losses stated above, but also their vehicle damage costs.

Legal Protection

This insurance bolt on is to cover the cost of defending court actions that arise from on the road incidents. It should include free 24 hour expert advisory legal services.

How much will car insurance cost?

The cost of car insurance can vary enormously depending on a lot of factors relating to you. A good insurance broker, who knows the market well, will be able to select the best policy for you. But as we stated many factors will influence the premium that you have to pay.

YOUR CAR - Generally speaking the more powerful the engine of your car the greater the cost it is to repair. It is also seen as a more desirable car therefore has a higher risk being broken into or stolen. Therefore this will effect the premium you will have to pay. If you drive a larger engine car you may like to know that there are companies that specialise in insuring them.

WHERE THE CAR IS KEPT - Your address, occupation and where your car is parked are also taken into consideration when pricing up your premium. Some areas are considered much higher risk than others. For example if you live within a more affluent area where the general car on the street is of a better quality, the cost to the insurers is more expensive if the cars are stolen in that area. So your postcode could have a detrimental effect on the premium cost. Likewise If you live in an inner city where you are more likely to be involved in an accident or have your car stolen, you will pay more than someone who lives in a country village. This is also applicable if you use your car for work so the insurers will take your work details into account. How and where you park your car is also taken into account, if your car is kept in a secure garage, as opposed to on the street, you gain a discount on the insurance policy.

DRIVER EXPERIENCE - Insurers will look at your age and driving experience (how long you have been driving). Young and new drivers are more likely to have accidents, while older more experienced drivers tend to be more careful. Insurers generally apply a basic rate to drivers aged 30-49. If you're younger than this it is highly likely that your premium is going to be higher due to the perceived higher risk. Being older often qualifies you for a discount on your premium. Any disabilities you have will also be taken into account. If you are a more experienced driver, remember that including cover for drivers under the age of 25 will also affect your premium - costs can be kept lower by restricting the drivers to you, or you and your legal partner only. Women invariably make fewer insurance claims than men, because of this thera are now a number of female only insurers which specialise in given women cheaper car insurance and better discounts.

MOTORING OFFENSES - If you've been convicted of a motoring offence in the past, and have a history of accidents your risk is greater so your premium will be greater.

THE INSURERS RISK - It is up to the insurer as to whether they insure you or not. Many companies will in fact only insure a certain demographic (women, older drivers, over 4 years no claims). So before an insurance company sells you a motor insurance policy they will want to weigh up all the potential risks involved, so before your broker or the company can offer you an accurate quotation they will have to ask a lot of detailed questions covering all the points stated above. VERY IMPORTANT - if you fail to provide accurate information from the outset you could nullify your agreement and a subsequent claim may be refused.

USING BROKERS - To help you decide it may be worth consulting a broker, or using a comparison site to obtain what's available and finding not only the cheapest best right deal for you.

Cutting the Cost

You can reduce the premium you pay by restricting the cover granted by the policy, by adding or removing options. For example - you could limit the number of people who can drive the vehicle. But obviously be careful as if the regular driver is incapacitated, you wouldn't want to find out that nobody else can drive the car in an emergency.

Other ways of cutting your insurance costs is to agree to pay the first part of any claim commonly known as 'excess'. If you take out voluntary excess further discounts are available (e.g. £100) but be aware that compulsory excesses may already apply. Young/New drivers may be able to obtain an initial discount on their first year's policy if they successfully sit the "Pass Plus" exam.

Payment of Policies

Most insurers will take the payments in number of ways - all in one go, Monthly or Quarterly. Often if you pay the entire policy up front will make you eligible for a discount.

No Claims Bonus

If you successfully drive for a year without making a claim, you should be eligible for a 'no claim discount' or 'no claim bonus.' In most cases this will amount to a reduction of 30% on your premium in the first year, rising every year in steps to a maximum of 60 or 65%. Some insurers will fast track your no claims to 9 months if you sign up for a longer period of policy.

By making a claim, your no claim bonus will be reduced or removed. If you have managed to build up a higher rate of bonus, most insurers will usually knock it down by two years, rather than removing it altogether. Look out for no claims protection which some insurers may offer, this is simply insurance to protect the no claims bonus. More often than not it is far cheaper to pay for minor damage yourself, rather than risk losing your no claims bonus.

What happens if you are in an accident which was not your fault? If you protect or guarantee your 'no claim bonus' it will be preserved following the incident, but if it is not protected it will be stepped back until the claim is resolved and a monetary recovery is made in full from the guilty third party. If the insurer is able to recover the cost from the Third Party who was at fault your no claim bonus shouldn't be affected.

It is very important that you inform your broker of all incidents of damage or loss, no matter how small, and even if you do not make a claim for them. There have been a number of cases where insurance companies have refused to pay for claims as the driver failed to disclose previous incident information.

Overseas Cover

If you take out a UK policy you will get cover in EU countries that meets their minimum legal requirements, but this will probably not be enough should you have an accident. It will not cover you for theft or damage to your car and the legal liabilities to other people that may occur. If you need tighter cover for going abroad some insurers will give you comprehensive cover as standard whereas others will require you to pay an additional premium. If you are a regular traveller to the continent ensure you check your policy or with your broker when you purchase it. In some cases to validate the insurance you may need to advise your insurer as and when you go abroad.

If you don't tell your insurer that you have had an accident, you will probably find yourself paying for the extra costs that would have been incurred had the accident happened in this country, provided your insurer agrees to deal with your claim.

So make sure when you start your policy that ask your broker or insurer if you have an EU certificate and if it is necessary to tell them about journeys less than 30 days to Europe.

If you do not have the EU certificate, or are travelling outside of Europe you will need to give your insurer plenty of notice that you wish to obtain a 'green card'. The green card will provide the country that you are visiting the necessary evidence that your policy meets the legal requirements for third party liability.

Make sure you check that if you do travel outside the UK your insurance policy will extend the same cover to Europe . A lot of policies will only give the minimum legal requirement in the country you visit which will not necessarily be the same as your UK cover, in this scenario the policy will definitely not provide cover for loss or damage to your vehicle.