Car insurance small print

This is a brief and very general guide to some of the terms that insurance companies use to describe motor insurance. These are also phrases and words, you will find in the small print on the back of your policy. We also examine how the companies decide how much to change for your motor policy.

The UK currently has in excess of 100 insurers dealing insurance for motor vehicles. The wording on policies from these companies can vary and the terms can also differ greatly. So it is a good idea to have some knowledge of what these different terms mean, and how they affect the policy you are considering taking out.

For several decades there have been three main types of insurance or motor vehicles. Comprehensive, often called ‘fully comp’, Third Party Fire & Theft, this is usually, called ‘third party’. The final type of UK motor insurance is Third Party Only.

This is a basic breakdown of what these three different insurance types cover.

Comprehensive, is also called fully comprehensive, as the name implies is intended to cover all eventualities. Covering other people's property and the owner’s vehicle itself.

This policy will pay out if for example, you are involved in an accident where another car was damaged. It will cover not only damage to the other vehicle, but also to your car as well.

If you car should set on fire or stolen the insurance company will pay for the replacement of the vehicle. The insurance company will also make payment to the policyholder even if the owner was at fault and caused the accident or injuries to another person.

Third party fire and theft policies do not cover any repairs that may be needed if your car is involved in an accident. It will pay for repairs to the other car involved should it be found that you were to blame for the damage.

You will also be covered if the car is stolen or set on fire.  This is the main difference with the third type of insurance Third Party only, with this kind of policy you will not receive any money, if you car is lost to fire or is stolen. You are only covered for any damage you may cause to another vehicle on the road.

Choosing the right policy for your needs is very important, it is very hard to say which policy is the best one individual's needs.  The broker will be able to give you the best advice on that subject.

For each year that you drive, and you do not make an insurance claim, you are entitled to a discount on the amount you pay for your car insurance. This discount is known as No Claims discount or No Claims bonus.

This discount gets larger each year that you do not make an insurance claim.  The maximum discount you can obtain is five years, which may be as much as 70% off the total annual premium.

Some companies also offer protection for your no claims bonus, for a reasonably small annual fee.  If you are involved in an accident the company will pay out without hurting your no claims bonus, which means you will still keep the same discount.

All cars are not the same, a basic Ford Fiesta is much cheaper to buy and replace than a top of the range Mercedes. Therefore, it is only fair that if you drive a Ford Fiesta you should not pay as much insurance as a person who owns a Mercedes.

To work out how much insurance you should pay the company's put every single car into a different ‘Insurance Group’ your Fiesta will be in an insurance group, with the number three or four. The Mercedes would be in group 18 or 20, the most expensive vehicle groups.

Another important point when thinking about buying a car and insurance is the size of the engine. The more powerful car, the higher the insurance premium.

What you do for a living can also have an affect on how much the insurance company will charge you as well as how many miles you drive each year.  The reason for that is a pretty straightforward, if you are a sales rep who drives up and down the motorways every working day.  You will cover more miles, and therefore have an increased risk of having an accident.

The area you live in will also affect how much you pay.  Again the reason for this is fairly simple. Insurance companies study statistics to learn which areas have the most thefts and accidents. The more claims there are in your area the more money you will pay for insurance.

How much care you take of your vehicle can also reduce or increase your annual much insurance premium.  If you have a certified car alarm fitted, or perhaps put your car away in a garage every night, this will also help to lower your premium.

Another variable that can affect your insurance costs is the price you pay for the car, obviously more expensive vehicle the bigger the risk to the insurance company.

If you have had accidents or motoring convictions, the insurance company will take these into consideration and will probably raise your premium. It is however, a very bad idea to try to conceal any accidents or convictions from the insurance company, as this may stop you being paid, should you make a claim.

If you are in any way confused, or do not understand any of the terms used by an insurance company.  Ask your broker what they mean; he will be able to give you a very clear and simple definition of any word or phrase used by your insurance company.