Car insurance: what you need to know

The Road Traffic Act says you must be insured to cover the costs of you injuring someone or damaging their property when you’re at the wheel. If you don’t have cover and do drive, you could be disqualified from driving, fined, imprisoned or have your car confiscated and crushed.

If any of this happens to you, you'll find motor insurance a lot harder to get in the future and premiums are likely to be a lot more expensive.

Do a car insurance comparison and you'll see that there are different levels of coverage ranging from basic to comprehensive. Not surprisingly, when you compare car insurance quotes you'll find basic coverage is usually cheaper. Here’s a quick guide to the main categories:
 

Third party car insurance – basic:
This covers you if you’re in an accident and injure someone and/or damage their property, including their vehicle. Third party insurance won’t cover damage to your car so you’d have to pay for any repairs yourself. It’s also unlikely to cover damage caused by you towing a caravan or trailer.

Third party, fire and theft – a step up:
You get the same level of protection as third party car insurance but with additional cover in the event your car is stolen, damaged or destroyed by fire. Premiums are therefore likely to be higher.

Comprehensive car insurance – top of the range:
You get all the above plus coverage for the cost of repairs to your car following an accident – or its replacement. Comprehensive car insurance can also cover medical expenses, personal belongings in the car that are stolen or damaged, liability arising from a caravan or trailer on your car and liability of passengers if an accident is caused by them.
  

When you take out car insurance, you usually get:

• Certificate of insurance – the proof that you have a car insurance policy.
• Policy document – a list of your policy's details. Read it carefully to ensure that the cover you expect is included.

• Who the policy covers. Be clear whether you want the insurance to cover just you or others, such as named drivers. Who you add will affect the premium.
• What you use your car for. Make sure your policy covers you for the uses you need it for, eg commuting, giving professional driving tuition, rallying and so on.
• No claims. You could get a protected discount, allowing you to make a certain number of claims without losing your no-claims discount. This is rarely free so look at the impact on your motor insurance premium.
• Look at the excess when getting car insurance quotes. These may vary depending on the type of claim you make. Remember that many insurers will impose limits on what they will pay out in a claim so make sure this matches your needs.
• Driving abroad. Consider what your policy covers you for (if anything) and the cost of extending your insurance if you want to take your car overseas.
• Courtesy car. Is one offered as standard? Check when you compare car insurance quotes.
• Replacement vehicle. If your car is a write-off, do you get a new vehicle as standard or one that is second-hand?

Car insurance quotes and premiums can vary dramatically and a range of factors play into the cost including your age, gender, make of car and engine size. If you’ve been banned from driving in the past or have lots of points on your licence be prepared to pay more – or even be refused a car insurance quote altogether.

Where you live will have an impact so you’re likely to pay more if you live in an area where several motor insurance claims have been made.

So how can you keep costs down? The following may help:

• Take security precautions to protect the vehicle, such as locking it in a garage or fitting an immobiliser
• Go for a smaller engine size and don’t be tempted by flashy, expensive cars
• Go for a higher excess
• Demonstrate a perfect driving record and build up your no-claims history
• Limit the people covered to drive the car and the uses you want cover for, eg commuting to work
• Agree to a mileage limit, eg 10,000 miles a year
• Consider taking PassPlus – a Driving Standards Agency course for new drivers. Some insurers offer discounts if you pass.

• Be honest when you fill out your car insurance quote form or you could find any claim refused – and even be prosecuted for fraud.
• Always read the policy details before signing on the dotted line.
• Cheap may be cheerful but it will not necessarily provide the level of protection you need so always weigh cost against benefits when you compare car insurance quotes.