Guide to Motor Insurance – The Basics
In the vast majority of cases, whether to take out an insurance policy or not is left to a consumer’s own
discretion &ndash and of course their attitude to risk. Motor insurance however, is mandatory. In short, the law
requires that all drivers are insured against damage to another car or injury of another person whilst in charge
of a vehicle. However, while all drivers must have basic motor insurance in place, they can choose the level of
cover to opt for.
Third party
This level of cover is the minimum required by law and therefore the cheapest to buy. True to its name, the
policy will only pay out to the ‘third party’ in the event of any accident or injury and won’t cover your own
costs incurred.It can make sense to opt for third party cover if your car is old and of less value than the cost of fully comprehensive cover over a year. In this case, in the event of an accident or scrape, you would perhaps choose to scrap the car rather than replace or repair it anyway.
This level of cover is the minimum required by law and therefore the cheapest to buy. True to its name, the policy will only pay out to the ‘third party’ in the event of any accident or injury and won’t cover your own costs incurred.
It can make sense to opt for third party cover if your car is old and of less value than the cost of fully comprehensive cover over a year. In this case, in the event of an accident or scrape, you would perhaps choose to scrap the car rather than replace or repair it anyway.
Third party, fire and theft
Quite obviously, this adds on two extra layers of protection that are surplus to the legal minimum requirement.
In addition to paying out to a third party, this type of policy will cover you in the event of fire damage to your vehicle,
as well as its theft &ndash or damage as a result of attempted theft. Logically then, this type of cover is slightly more expensive
than straightforward third party cover.
Fully comprehensive
The most thorough and expensive cover you can buy for your car is called fully comprehensive insurance.
This will pay out in the event of damage or injury to both you and to a third party. Fully comprehensive insurance is the
most popular option as most drivers want peace of mind that they will also have their own vehicle paid for in the even of an
accident or car break in.
However it’s also because many cars are bought with a loan or credit agreement. Without fully comprehensive insurance, in the event of a loss or accident, you would have to continue paying the finance despite potentially being without a car – the worst of both worlds.
However it’s also because many cars are bought with a loan or credit agreement. Without fully comprehensive insurance, in the event of a loss or accident, you would have to continue paying the finance despite potentially being without a car – the worst of both worlds.
How is my premium calculated?
Motor premiums will vary between insurers according to how commercially competitive they are within the market
place at that time. However your final quote will predominantly hinge on the risk you pose to the insurer.
Each insurer will have its own bank of statistical data which it will use to asses your personal risk. This data will also
vary between insurers but as a benchmark, your premium will be assessed on the following:
The car itself: The higher the value, performance and cost of replacement parts of the car, the more it will cost to insure.
Your gender: Women can often get better deals than men, as statistically, they make fewer claims.
Your age: If you are very young and inexperienced or very old, this is likely to increase your premiums.
Your previous insurance claims: If you have made claims prior to applying for your motor insurance, this will also be reflected with a higher premium. And if you have points on your licence from previous offences such as speeding, which deem you an unreliable driver, you will pay for that too.
Where you live: There’s not much you can do about your postcode but this will also affect your premium. An insurer will use its database to see how many claims your postcode area generates – and if it’s above average this will be loaded onto the premium you are quoted.
Your profession: Insurers will class certain professions as higher risk than others. For example, if your job keeps you on the road all day, statistically you will have a greater chance of an accident.
Your health: Drivers who suffer from certain conditions such as epilepsy or even sleep disorders are likely to be quoted a higher premium.
Where the car is kept: Logically, your premium will be lower if you can park your car off the road – and lower still if it is kept in a garage overnight.
Other named drivers: It will usually cost more to put someone else on your insurance. Their personal circumstances will also be evaluated so, if it’s an 18-year old male, prepare yourself for a steep hike.
The car itself: The higher the value, performance and cost of replacement parts of the car, the more it will cost to insure.
Your gender: Women can often get better deals than men, as statistically, they make fewer claims.
Your age: If you are very young and inexperienced or very old, this is likely to increase your premiums.
Your previous insurance claims: If you have made claims prior to applying for your motor insurance, this will also be reflected with a higher premium. And if you have points on your licence from previous offences such as speeding, which deem you an unreliable driver, you will pay for that too.
Where you live: There’s not much you can do about your postcode but this will also affect your premium. An insurer will use its database to see how many claims your postcode area generates – and if it’s above average this will be loaded onto the premium you are quoted.
Your profession: Insurers will class certain professions as higher risk than others. For example, if your job keeps you on the road all day, statistically you will have a greater chance of an accident.
Your health: Drivers who suffer from certain conditions such as epilepsy or even sleep disorders are likely to be quoted a higher premium.
Where the car is kept: Logically, your premium will be lower if you can park your car off the road – and lower still if it is kept in a garage overnight.
Other named drivers: It will usually cost more to put someone else on your insurance. Their personal circumstances will also be evaluated so, if it’s an 18-year old male, prepare yourself for a steep hike.