Car Insurance FAQ

If You drive a vehicle such as car , van, motorbike or even a scooter you are going to need motor insurance. Car Insurance tends to be the most common insurance. This FAQ guide answers some of the most questions asked regarding car insurance.

Yes, in the united kingdom it is required that by law that you have a minimum of third party , fire and theft insurance cover. The law requires you to be covered against claims that may be made against you should in the unfortunate event of an accident.

In other words all motorists are required by the Road Traffic Act to have insurance cover that protects the liability for bodily injury or damage to a property of third parties arising during the use of a motor vehicle on a road.

Motor vehicle in this instance is a legal term defined by the Road Traffic Act to be a mechanically propelled vehicle intended or adapted for use on roads Section 185 Road Traffic Act 1988. This means you legally need insurance whether you are riding a motorcycle, driving a car, van or other road vehicle. However there are exceptions for example electrically-assisted pedal cycles and ride-on lawnmowers.

What the legal provision for third party insurance means is that you are covered for any liability for injuries to other people, their property and their cars caused by the use of your car while it is on a public road. When you purchase motor insurance your insurer will usually issue two documents

Your insurance policy should be written in easy to understand language with no small print. If you are unsure as to what you are and are not covered agaist you must ask your provider to explain.

In the united kingdom there are three basic types of car insurance, third part,; third party fire and theft; and fully comprehensive.

Third party Only insurance is usually the cheapest Car Insurance option and will only cover damage sustained to the other drivers car. It will not cover your own vehicle. It is the very minimum legally cover required by the Road Traffic Act - your liability to others on public roads.

Third party, fire and theft Insurance will cover you the event of an accident, although this type of policy will only cover you for damage sustained to the other person's vehicle but will not cover damage to your own car. However you are covered against the fire and theft of your vehicle as well as being covered for the cost of repairing damage caused by a theft or attempted theft.

Fully comprehensive insurance extends the cover you have still further. As well as third party, fire and theft cover it also includes accidental damage to your car. A fully comprehensive policy may also give you third party cover when you drive other peoples vehicles - useful if you borrow someones car and their insurance does not automatically cover you.

On top of these three basic types of insurance you may find a huge selection of optional extras. These can include free windscren replacement, free breakdown and many other great addons.

In broad terms you get what you pay for even taking into account the variations between different insurance companies. In other words straightforward third party cover is a lot cheaper than fully comprehensive car insurance. Fully comprehensive cover is obviously better but for some drivers it can be very expensive.

A No Claims Discount is what you get for being offered a No Claims Bonus by your insurer. It is a bonus worth having because it can substantially reduce the cost of your car insurance by as much as 70%. The way the discount operates is quite simple. A 70% discount would cut the actual cost to you of a policy with an initial premium of £1000 to just £300.

The bonus is effectively one of the ways in which an insurance company measures the risk that you may make an insurance claim. Quite simply it reflects a number of claim-free driving years. In other words you are being rewarded for being a careful driver. Remember what counts is the percentage discount; three years No Claims Bonus with one company might be worth 50% and yet be worth 55% with another.

All insurers have their own No Claims Bonus and No Claims Discount scales but on average you may reasonably expect to receive a one-year bonus after one claim-free driving year that would equate to a discount of 25-30% on the cost of your car insurance policy. How much and how fast the discount rises thereafter will vary from insurer to insurer. Depending on the insurer you may reach a maximum No Claims Discount after between 4-6 years of claim free driving.

You may be able to keep your No Claims Discount even if you make an insurance claim. In the industry jargon any claim you make is classed as either a Fault claim or a Not Fault claim. If your claim is classified as a Fault claim then you may lose some or all of your No Claims Bonus. It is not affected if you have a Not Fault claim.

Fault is not necessarily a matter of blame for an incident. It is a question of whether the insurance company can recover the full cost of your insurance claim from a third party. If it can then your claim is a Not Fault claim and your No Claims Bonus will not be affected.

Once you have a No Claims Bonus your insurer may offer you the opportunity of protecting it by making a small extra payment on your insurance effectively you are insuring your insurance policy!. By protecting your No Claims Bonus you are protecting yourself against making a claim which should you for example have an accident could save a substantial amount in future car insurance costs.

You must tell your insurer anything which could be deemed to be relevant to their assessment of risk under your duty of disclosure . This means you must answer all the questions that your insurer asks you and you must answer them honestly.

Failure to disclose could invalidate your policy; actually lying counts as fraud. Even an innocent omission of a single speeding offence a few years ago could result in your insurer refusing to pay a claim. In short trying to reduce your premium by presenting your case inaccurately is a false economy.

If you are renewing car insurance you still have a duty of disclosure to tell your insurer of any factors that may affect your insurance premium. You should also keep you insurer up to date with relevant changes during the year such as if you move home or change your car.

The Rehabilitation of Offenders Act 1974 enables some criminal convictions to become spent or ignored after a rehabilitation period. If the proposal form asks whether the applicant has any previous driving convictions the answer can be no if the driving convictions are spent. This is the case even if the conviction is relevant to the risk.

However if your insurer asks a question phrased so as to include spent convictions you may be held to have given fraudulent information if you say no. An example of such a question would be "Do you have any convictions spent or otherwise"

Convictions resulting in fines take five years to be spent. If a motorist is fined for drink driving and has his or her licence endorsed the rehabilitation period would be five years the length applicable to the fine rather than 11 years the length of time before a driver convicted of drink driving is entitled to a clean driving licence.

Every insurance company takes into account several factors on each individual policy. your premimum can depend on your own personal statistics as to how much you will pay for your insurance cover. The four most common factors that insurance companies look at are:

The drivers - you, your age, your job and your driving record and similar information for anybody else likely to drive the car under your insurance
The car itself - all cars in the UK are classified in one of 20 insurance rating groups which insurers find helpful as one of the many inputs to their premium decision and you may wish to consider these when purchasing a new car
Location - you'll pay more if you keep the car in a high-crime area. The place where the car is kept is a rating factor so tell your insurer if the car is not kept at your home address. You should also be honest about whether you keep the car parked on the road or whether it is stored in a garage
Use - your insurer will want to know what you use the car for. You'll pay more if for example you plan to use the car for business purposes

Family cars with moderate repair costs are usually cheaper to insure than large or powerful cars which can be expensive to repair. However despite the fact that all insurers will be basing their premium quotations on the same set of information there can be substantial differences between companies quotes. This is because some firms specialise in certain areas while others may try to offer a reasonable price to virtually everyone.

The first way you can reduce the cost of your car insurance is by accepting a larger voluntary excess. Virtually all car insurance policies will require that you pay some money towards the cost of any claim. If for example you offered to pay the first £250 of a claim instead of the first £100 you should see a noticeable cut in the premium your insurer is asking for.

Other things you can immediately do to reduce your car insurance costs are to limit the policy cover to specific named drivers instead of fixing cover for anyone who drives the car with your permission, ensure that you keep your car in a garage when not in use, drive a low annual mileage and with some insurers insure more than one car with the same company.

You could also make yourself a better driver! Insurance companies are just as keen as you that you don't have an accident and submit a claim. Some reward policyholders who complete a designated driving course with a discount off their premium. This might not necessarily be an official advanced driving certificate but merely a defensive driving course that has been approved by the insurance company concerned.

You may also be able to reduce your premium by installing security devices on your vehicle. Since 1995 vehicles sold specifically for the UK market have been assessed by the insurance industrys research centre Thatcham to establish the level of standard fit security. Source Association of British Insurers Manufacturers whose vehicles are fitted with systems that meet the standard Thatcham criteria may benefit from improved insurance group ratings thus cutting the cost of your car insurance. Older cars may qualify for car insurance premium discounts if subsequently fitted with alarms or immobilisers meeting the criteria.

However even after you have done everything you can to keep the cost of your car insurance down the premium could still run to several hundred pounds. Parting with what it costs for a years motor insurance can be a nasty shock for anyones purse or wallet so most insurance companies will allow you to pay by instalments in order to spread the bill over 12 months. However this won't come for free. Insurers typically charge an interest rate for paying monthly which staggeringly can be more than 25% APR. Virgin Money is one of the few insurers that will charge the same regardless of whether you pay monthly or annually.

All UK insurance policies automatically provide at no extra cost the minimum cover required by law in all European Union EU countries or the minimum cover in the UK if that is greater. The minimum required is cover for your liability to third parties. Your car insurance will also be valid third party cover in a number of other European countries. For details you should check the situation with your insurer.

You may have to pay an extra premium if you want to extend your cover. However some insurers automatically provide this extended cover for a specified period and often without additional charge. Again its best to check with your insurer before you go.

Your insurer may issue you with an internationally recognised green card for driving outside the UK. The green card is recognised by all countries who are members of the Green Card System. If you do not take a green card you should make sure you pack your Certificate of Insurance.

A green card is not a legal requirement nor is the card insurance cover in itself. Nevertheless it can be a useful document because it is readily recognisable by police and can save time and trouble if you need to produce evidence of insurance e.g. if you are involved in an accident.

If you have the misfortune to be in a motor accident, the last thing you really need is the extra stress that may come with a dispute over who was at fault and whos going to pay for repairs.

However if you have legal expenses insurance or uninsured loss recovery as it is sometimes known, you at least have the security of knowing that your legal costs will be met. This means that if you are out of pocket following your claim you can let the legal expenses insurer pursue the other party for the appropriate amount on your behalf.

This may for example include travelling expenses incurred when your car was off the road following an accident that was not your fault. You can also use legal expenses insurance to cover the cost of defending yourself if someone brings an action against you.

You may find that your motor insurance policy includes this sort of protection already as an added extra but if not you may be able to arrange a separate contract through your insurer.

Car insurance is not a sentimental business. If your car is a write-off for example you should receive the market value of the vehicle allowing you to replace like with like. You won't end up with something better or even something worth what you paid for the car in the first place.

It is a fact of life that cars depreciate and do so faster than any other consumer item. Car insurance is not available on a new for old basis. Not only is insurance not a sentimental business it is not a charity either!

What counts as market value may come as a shock to you. The value you attribute to a vehicle in terms of usefulness and reliability may not indeed probably will not translate into pounds and pence in a market valuation.

And as for those bull bars shagpile carpets fluffy dice or that heavy bass stereo system you added - well it is a bit like a house. Lots of special features that you might spend thousands on do not add substantially to the market value and in some cases may actually reduce it.

So if an insurance company offers you a market valuation that is substantially different from the price of cars you see on local forecourts or indeed on the internet don't be surprised. This is not a case of the insurance company trying to do you out of your rightful valuation; at least most of the time its not - on rare occasions it might be.

Sometimes insurers argue that the price you should get is the trade value what a motor trader would pay rather than the market value. But in general what you are seeing is another fact of life in the automobile market. It is this advertised prices tend to be no more than the starting point for negotiation rather than immutable.

So just what is a realistic valuation for your vehicle? If you cant trust what you see on the forecourts, in the papers and on most of the websites selling cars - you have a couple of starting points the motor trade tends to use one of two bibles either.

On 14 January 2005 general insurance which includes motor insurance came under the auspices of the Financial Services Authority. Previously general insurance ran under a voluntary system of regulation operated by the General Insurance Standards Council GISC. The FSA has specific responsibilities to consumers aiming to help people become better informed about financial matters so that they can manage their financial affairs more effectively. The FSAs consumer helpline is available Monday-Friday 8.00am-8.00pm on 0845 606 1234 and the watchdog also has a dedicated consumer-orientated website - http://www.fsa.gov.uk/consumer

If you have a complaint about your insurance policy that your insurer is unable to resolve you may be able to take your problem to the Financial Ombudsman Service on 0845 080 1800 which can help with most financial complaints.

The Financial Services Compensation Scheme has the power to compensate consumers in the event of the failure of any authorised firm under the Financial Services and Markets Act. Policyholders are protected if they are insured by authorised insurance companies under contracts of insurance issued in the UK or in some cases in the EEA Channel Islands or Isle of Man. The Scheme covers among other financial products compulsory general and life insurance and is triggered if an insurance company goes out of business or into liquidation.

The maximum level of compensation you can receive from the Scheme for a claim against an insurance company depends on the type of insurance policy although the FSCS may arrange to transfer your policy to another insurer provide a new policy or if this has not been possible provide compensation.

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