Car Insurance Explained
Under the Road Traffic Act 1988 it is an offence to drive a motor vehicle on the road without valid insurance in place. This insurance policy must at least cover you for injury or damage to a third party while using that motor vehicle.
Types of Cover
This is the lowest level of cover allowed by law. Such cover will insure you against any damage and injuries caused to another person or their property. However, it does not pay for any injury to you or damage to your car.
Third Party Fire & Theft
This is similar to third party cover but will also pay to repair or replace your car if it stolen or if it is damaged or destroyed by fire.
This cover extends third party fire & theft insurance to cover damage to your own car in the event of an accident.
Third Party, Fire & Theft cover may be slightly cheaper than comprehensive cover but the difference in price has been narrowing so the extra cover provided under a comprehensive policy may offer better value for money.
Motor Insurance policies have a number of specific features some of which are optional at extra cost or affect the price quoted. This is a brief summary of some of these features:
Most motor insurance policies will include an ‘excess’ figure. This figure is the amount the policy holder will need to pay before the insurance company releases money for a claim.
For example, if as a result of an accident, a car suffers £1,000 of damage and the excess amount on the policy is £100 the insurance company will only be liable for £900.
Policy holders can volunteer to pay a higher excess in return for a slightly reduced premium. However, beware of electing to pay a very high excess if such a payment is beyond your means and therefore, makes it impossible to repair the vehicle in the event of damage.
Motor insurance companies reward drivers who do not make a claim during the policy year by offering a percentage discount from the policy price in subsequent years.
The no-claim discount offered varies from company to company so it is wise to check with your company what levels of discount are being offered for claim free motoring. Normally a motorist who achieves five years claim free motoring can expect a discount of around 60% – 70%.
If a claim is made and you are considered at fault then part of the no-claim discount will be removed at the next renewal date. Again the amount of reduction varies between insurers but typically between 5% – 20% of the discount could be lost following a claim.
Protected No-Claims Discount
It is possible to pay to protect the no-claim discount so that it will not be reduced in the event of a fault accident. Typically the cost is between 10% – 15% of the total policy and normally only applies if the full no-claim discount has been reached. Again check with your company to gain their rules on such matters.
Often, even with a protected no-claim discount, a motorist making several claims in the same year will forfeit this benefit.
Driving Other Cars
Most comprehensive policies provide cover for the policy holder to drive other vehicles not belonging to them. However, such cover is almost always restricted to third-party and is really intended only for ‘emergency’ or short term use of another vehicle.
Although each motor policy refers to a particular and noted vehicle it is normally a requirement for the insurance company to have an agreed list of ‘named drivers’ that are allowed to use the vehicle legally. The ‘driving other cars’ extension available to the main policy holder is rarely extended to named drivers. An increasing number of companies are now counting the years a ‘named driver’ uses a vehicle towards a no-claim discount for such drivers if they eventually insure a vehicle as the main policy holder.
Choice of Repairer
Most insurance companies have an approved list of vehicle repairers to which they prefer all damaged vehicles are sent to. It can be very difficult for policy holders to arrange repairs via any other repair company but if an estimate is obtained from alternative repairer which is equal or cheaper than that being charged by the approved repairer the insurers will usually allow you to use the alternative repairer
Most comprehensive motor policies will provide a courtesy car while the insured vehicle is being repaired at an approved repair centre. However, this courtesy car is provided by the repair centre and therefore, if the insurance claim is for a missing or a vehicle damaged beyond repair often no such temporary vehicle is provided. Check with your insurance company to see if such provision is included. Such provision may increase the premium cost.
Most comprehensive policies will provide some limited cover for personal items that have been damaged or stolen from the insured vehicle. However, the details of items covered varies greatly between different companies. Rarely will items such as cash, vouchers, etc. be covered and other items are normally covered only in terms of second hand value rather than ‘new for old’.
In Car Audio Equipment
There is normally a limit on the amount that can be claimed for these items. It is advisable to check with your company if you require enhanced cover.
Again it is worth checking with your insurer as to the level of cover for these items. Often a distinction is made between accessories fitted as standard and those added later.
Depending on your level of excess, claiming for items of relatively low cost can be uneconomic due to the loss of no-claim discount and the level of excess payment required.
Most insurance companies will impose age restrictions on their policies whether that be a minimum or maximum age. Some insurance companies are unattractive to younger drivers due to the high level of premium demanded from this group, while others put upper age limit restrictions on new business. Most often drivers aged over 80 will find it difficult to gain a quote for insurance from a new provider. GEM’s preferred insurance broker Shield Total Insurance is able to gain new business quotes for drivers up to the age of 85.
Car Insurance Costs
All motorists are concerned at the level of premium demanded for this ‘must have’ service. Here are few tips to help you reduce your premium.
Choose the Correct Car
Obviously more expensive or high performance cars will attract higher premiums. Consider whether the size and value of your car is really necessary and whether a lower insurance rated car would better suit your needs.
Park and Drive Carefully
It is a simple fact that drivers who have penalty points on their licences pay additional premium. Adopting a more defensive safer and legal approach to driving will result in lower premiums.
Likewise cars left in garages or on driveways are less likely to be damaged or stolen and again will help to reduce insurance costs.
Adding Additional Drivers
Adding additional drivers to a policy can add to the cost especially if that driver is under 25 and inexperienced. Consider whether it is really necessary to make this provision.
However, adding older and experienced drivers to a policy can reduce the premium as it is considered that the risks to that vehicle are reduced. Although this is a tempting solution to reduce premiums for younger drivers it could be classed as ‘fronting’ if in fact the main driver is the younger person. If insurance companies find this to be the case they may refuse to pay out for the full claim. In the worst case scenario the insurance company could pursue legal action for fraud.
Search Out the Best Deal
Insurance is a very competitive ‘industry’ and special offers and deals will always be available. On-line comparison sites will provide useful links to a variety of insurance companies but remember few comparison sites are totally independent and often the company listed at the ‘top’ will have paid a fee to gain that status. Check out a variety of sites to ensure you are getting a good deal and carefully check the level of cover being offered.
‘Pay As You Go’ Technology
Some insurance companies are now offering ‘pay as you go’ motor insurance which is charged monthly and is based on driving performance as monitored by electronic surveillance within the vehicle. Providing that strict driving codes are always adhered to this method of insurance could be beneficial to younger drivers.
However, there is no guarantee as to the final price and indeed it will take a 12 month period to be able to make a true comparison of annual cost.
As with any purchase quantity often means discount. Most insurance companies will offer lower premiums to members of groups where the group has promised the insurer a level of take-up. Members of GEM Motoring Assist can benefit from such discount via the nominated broker Shield Total Insurance.
Alterations to Your Car
Fitting extra security devices to your car such as an approved alarm, immobilizer or tracking device will assist in reducing your annual premium.
However modifying your car in other ways will most likely increase your premium. Changing body panels, wheels, exhausts, engine tuning etc. are all factors which can lead to an increase in insurance cost. Also remember that you have a legal duty to inform your insurance company of any significant items you alter on your car.
You should also remember to inform your insurer if your personal circumstances alter. Your employment, health record and of course your driving record with regard to offences are all items that need to be notified. If you use your car while at work or even to commute to work this information is required by your insurer.
It is now common place for product suppliers to make a charge for payments made by credit card and this will often include insurance providers. Likewise payments by instalments will normally attract an interest charge. However, it is wise to check the APR charged by your insurer as this percentage can vary widely.
There are many additional items related to motoring that insurance companies try to sell to policy holders. As with any sales initiative often the advantages of these items can be over exaggerated by the insurance company. For some motorists these additional items can be a sound investment, however, it is certainly true that for many they are of doubtful value and benefit. Think carefully about the risk you are insuring and the cover provided before agreeing to these ‘extras’. Here are a few:
Legal Expenses Cover
The prime function of a motor insurer is to repay the cost of damage or loss of a vehicle plus to compensate those injured in road crashes.
However, in the event of a accident for which a third party is totally at fault there is a legal case to be pursued via the insurer of the third party. Often motor insurance companies are reluctant to carry out these duties directly and sell the services of an “uninsured loss recovery company” to administer and if necessary take legal action to recover costs. Typically the additional premium requested to provide such a service is around £30 per annum.
Some affinity groups such as GEM Motoring Assist offer this service free of charge and provide an excellent means of ensuring that those innocent victims of road accidents receive adequate compensation.
The cost of replacing tyres damaged in minor road incidents can be covered without affecting no-claim discount. However in truth such incidents are rare and the premium charged sometimes does not truly reflect the risk.
Wing Mirror Insurance
Modern door mirrors are complicated and expensive items to replace and can easily be damaged in minor incidents. As with tyres these items can be insured separately without affecting no-claim discount.
Again it is important to gauge the risk level versus the premium charged.