Vehicle Insurance FAQ

Confused about car and motor insurance? Here’s everything you need to know, what it is, what it does, and what different types of coverage are available.

Jason Tassie Last updated on 01 June 2020.

What is vehicle insurance, and what does it cover?

Drivers of any type of road vehicle in the UK are legally required to have motor insurance. This covers you financially against damage to your vehicle, and the potential damage you might cause to other vehicles in the event of an accident. There are a range of other factors that your motor insurance might also cover, depending on the individual plan you select.

There are three main types of vehicle insurance that are available with most providers: third party, third party fire and theft, and fully comprehensive cover.

What is third party vehicle insurance?

Third party motor insurance is the minimum amount of coverage that the law decrees a vehicle must have in order to be driven on public roads.

This is a very basic level of insurance and won’t cover you for the majority of general repair costs, replacement parts, or if your vehicle is stolen or damaged by fire.

What it will cover is damage caused to anybody else’s property. If you are involved in an accident that is your fault, then any costs incurred due to the damage caused to the other person’s vehicle, or injury to a passenger, should be covered by this basic motor insurance package.

What is third party fire and theft vehicle insurance?

Third party fire and theft motor insurance does what the name would suggest – it offers the same legally mandated level of coverage as third party insurance, but also covers you for the costs resulting from damage to your vehicle caused by fire or theft.

What is fully comprehensive motor insurance?

Fully comprehensive motor insurance offers financial protection for damage and repairs to your vehicle in the majority of eventualities, as well as covering any costs incurred to a third party.

While it is the most comprehensive type of car and motor insurance available, exactly what is covered will differ from provider to provider, and you should shop around for the best deal based on which protection you require.

In general this level of insurance will cover for any damage caused to your vehicle and they will often cover the cost of replacement parts for your vehicle when necessary. Some premium options will add features such as breakdown cover, courtesy cars and cover for legal expenses.

How does motorbike insurance differ from car insurance?

Generally motorbike insurance plans are similar to car insurance. Third party, third party fire and theft, and comprehensive plans are available for motorbikes just as they are for cars.

Motorbike insurance is usually cheaper than car insurance, since the vehicles themselves are smaller and (usually) less valuable than cars. Nonetheless, the insurer will still likely take into account all of the same factors that influence the car insurance premium you’re likely to pay.

You will have a few extra factors to consider here however, like whether or not your riding gear and your passenger are included in the coverage. It’s also worth checking any security requirements carefully as well; as motorbikes have a higher risk of theft, the insurer may specify details regarding locks.

How does van insurance differ from car insurance?

Van insurance is a bit more complicated than car insurance. They’re generally seen as posing a higher claims risk due to the fact that they’re on the road more frequently.

Insurance companies will require a lot of detail to provide an accurate quote for your van insurance, such as how the vehicle is used, where it’s stored and the details of the jobs it’s used for, in order to get an accurate representation of the risk. Vans that are driven more will have higher premiums.

What affects the price of my car insurance?

Two people who apply for the same insurance with the same provider will rarely get the same quote. There are three main categories that are used to judge what kind of car insurance premium you are likely to pay:

  • Who you are: Car insurance companies will take lots of demographic factors into account when judging how likely you are to claim on your insurance. This has changed a lot recently with the European Court of Justice ruling which stopped companies discriminating on the basis of gender. Your profession is still taken into account, as this can influence the amount that you drive, and your credit score and perceived safety on the roads. The area you live in can also have an impact, as more densely populated, urban neighbourhoods are higher collision risks, while high crime areas could also be a factor.
  • Your driving history: Insurance companies will take into account how long you’ve been driving for, and the number of times you’ve had to claim on your insurance in the past. Those who have driven for a longer period of time and have a clean record are likely to pay lower premiums than newer drivers, or those with lots of claims.
  • What car you drive: The type of car you drive can affect the likelihood of an accident, and the price it would cost the insurance company to cover the repair costs if there were a claim. Flashy sports cars tend to attract higher premiums, as do cars with larger engines in general. Insurers look at a mixture of expense for replacement, and data relating to the likelihood of the specific model being involved in an accident.

What’s a No Claims Bonus?

Drivers who haven’t made a claim on their motor insurance in a long time should start to see their insurance premiums reduce in recognition of this. This is called a No Claims Bonus and it’s related to the number of years you’ve gone without making a claim.

After building up a lengthy No Claims Bonus, drivers can choose to protect it so that even if they do have an accident and are forced to make a claim, they will still benefit from a reduced level of premiums.

About the author:

Director at NerdWallet UK. Jason is a spokesperson for consumer finance and has a deep understanding of consumer behaviour in the finance market. Read more

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