A handy car insurance glossary
Searching through all the different kinds of car insurance in the UK is a tedious and thankless task, which is made yet more complicated by the wealth of confusing jargon involved.
At Confused.com, we believe our job is not only to help our customers find the right car insurance online, but also to help take the confusion out of the car insurance industry.
To help you we've compiled the following A-Z of car insurance terminology:
Annual mileage and annual business mileage
Before giving you a free car insurance quote some UK companies want to know whether you use your car for work. If so, they need to know how many business miles you drive.
The more miles covered in a year, the greater the potential risk of a claim. If you don't use your car for work, then the annual business mileage will be zero.
See No Claims Bonus
Many insurance companies and syndicates, such as Lloyds of London, one of the most famous underwriters of car insurance in the UK, sell their services through intermediaries or brokers.
Brokers have access to a number of companies and can provide standard Screen rates to give you a free car insurance quote. In some circumstances, brokers can negotiate a better deal directly with the company. This is called the Off-screen rate.
Certificate of Insurance
Once you have paid for your car insurance online, over the phone or set up a direct debit, your insurer will issue a Certificate of Insurance. This is proof that the driver is insured and is valid for the duration of the policy.
A temporary certificate of insurance issued if you have not yet paid (but have promised to pay) or when you have been given temporary extensions of cover. If you are buying your car insurance online, some insurers will allow you to print off a cover note.
Remember: it is important that you buy the right cover for your car. If you buy the wrong cover, your insurance company might not pay out on a claim. The following are the three most common types of car insurance in the UK:
Third Party Only (TPO)
Insurance covers any claim by third parties. This does not cover damage to the driver's own car.
Third Party Fire and Theft (TPFT)
Insurance covers fire and theft of the driver's car in addition to TPO cover.
Insurance covers accidental damage to the driver's car in addition to TPFT cover.
Driving Other Car (DOC)
This only applies to the policy holder and allows you to drive cars that you do not own. Remember this only provides TPO car insurance in the UK. It cannot be used abroad and will not usually cover vans or lorries.
DOC is designed for emergency use only. It is often excluded for younger drivers and some occupations. Check your Certificate of Insurance to see whether your policy includes DOC.
Conviction codes can be found on a driving licence along with the rest of the conviction details. It is usually a four-figure code made up of letters and numbers. For example: SP30 is the code for speeding in a built up area. TS10 is the code for a traffic signals offence.
Excess is the amount of money that you pay in the event of a claim. Compulsory excesses differ across the various insurers. Young driver excesses are common across the industry but the type of car driven or the area in which the driver lives may also mean compulsory excesses with some companies.
When you are completing a car insurance quote, try choosing to pay a higher excess as a way of lowering your premium. For more information, see Voluntary Excess.
The terms fault and non-fault can be confusing. A non-fault claim is simply a claim where the insurer is able to recover all their costs from someone else. If they are not able to recover all their costs, then it is a fault claim - even if the insured party didn't cause the claim to happen.
For example, a theft is typically classed as a fault claim. This is because even though the driver is not to blame for the theft, there is no third party to pay the costs so the insurance company treats it as a fault claim.
See Green Card.
This is a certificate that British drivers have historically needed when driving overseas as proof of they have car insurance (UK policies usually only provide basic cover for trips to mainland Europe).
With the advent of the single market in the early Nineties, many Continental countries agreed that British tourists no longer needed to travel with Green Card documentation but it was not universally applied across Europe nor indeed within the countries that were party to the agreement.
The Green Card itself is free. It demonstrates that there is some level of cover for your car but unless you extend your cover, you will only have basic Road Traffic Accident insurance or third party cover at best while abroad.
Insurers often say they charge for a Green Card and can call it 'Green Card cover' but in reality they are charging for extending the same level of car insurance in the UK to cover Europe.
This 'foreign use extension' is rarely included within your existing policy for free. It is also rare to be able to arrange Green Card car insurance online.
For more information, see the Driving Abroad section of this guide
In terms of insurance, hazards are the criteria that are likely to affect any loss, damage or injury. For example, a high performance TVR is a greater hazard than a 1.1 Ford Fiesta and a young driver is a greater hazard than an experienced one.
The greater the hazard, the higher the premium. If you are in a high-risk category, you can use confused.com to compare free car insurance quotes from specialist brokers online.
An immobiliser is an electronic device which stops a car from being started until it is deactivated. Although this won't stop the car from being broken into, it may well stop it from being driven away.
For more information, see How to drive down the cost of car insurance
Most newer cars (those built after 1997) come with an alarm and/or immobiliser, which can help lower the cost of your car insurance.
UK insurers will already have the details of the alarms and immobilisers that are fitted to newer cars as standard. This is built into their rating criteria to give you a more accurate free car insurance quote. If it is an older car, it may have a specific alarm.
All alarms and immobilisers are categorised and insurers may give discounts depending upon the make and model of alarm or immobiliser. Look up the alarm details on the documentation that came with it, before getting car insurance online.
It can be hard finding car insurance for UK-imported vehicles as some companies won't cover import cars at all or impose a surcharge.
Imported cars fall into two types for car insurance:
These are cars brought in from abroad that match UK specifications. Some companies will insure these but not all.
These are cars that are brought into the UK from abroad but don't match current UK specifications. These cars are more difficult to insure because of the lack of availability of parts.
This is the main principle of insurance. Insurance exists to replace something that has been lost or damaged, and an indemnity seeks to restore the insured person to the same financial position after the loss as immediately before.
Institute of Advanced Motoring (IAM)
The IAM gives drivers the chance to sit a more advanced test. Passing the test can help you to receive discounts on car insurance from UK companies.
This applies to ownership of the insured property. For example, a finance company may have an insurable interest in a vehicle if they helped pay for the purchase.
Legal Expenses Cover
See Uninsured Loss Recovery and Legal Expenses Cover explained.
You can buy car insurance online if you hold a provisional licence. But remember to let the insurance company know as soon as you pass to ensure you insurance stays valid. Some insurers may give discounts to drivers who have passed the Pass Plus or IAM test.
The main driver is the person who uses the car the most. It is best to be honest here - if an owner claims to be the main driver but lets someone else, such as a son or daughter, use the car permanently, an insurer can invalidate any claim.
Remember, you can always use Confused.com to compare separate free car insurance quotes for multiple named drivers and individuals before you buy car insurance online.
This is any factor that might affect a broker or underwriter's decision to provide you with car insurance. UK law means you are obliged to advise your insurance company of any material facts, such as points on your licence or modifications to your car.
If facts come to light once a claim has been made, the insurer has the right to refuse payment for all or part of the claim.
These are any changes that have been made to your car since it was produced, including the addition of such things as alloy wheels, spoilers or engine modifications. See Material facts.
Motor Insurance Bureau (MIB)
Funded by the insurance industry, the MIB was set up to reimburse consumers left out of pocket from incidents involving uninsured drivers. The fund pays out to victims unable to recover all their costs from their insurer, although all the claims are subject to a £300 excess. In 2002, the bureau paid out some £250m in response to more than 50,000 claims.
As well as covering any costs caused by the uninsured driver the MIB also offers victims the chance to claim higher levels of personal injury compensation than that offered under most car insurance in the UK.
No Claims Bonus (NCB)
The discount that drivers have earned on a previous insurance policy. Insurers give discounts determined by the number of years that a driver remains claim-free and a NCB must be earned separately for each insured car.
However, a few companies give discounts for second cars and credit for previous claim-free company car driving if it can be proved. In these situations only a couple of free car insurance quotes can be sourced on the internet and the best bet is to use the phone to see if it is possible to get a discount.
For more information, see No Claims Bonus Explained.
Owner and Registered keeper
There may be a reason for the owner and registered keeper to be different people. For example, you may drive a company car that is owned by your employer or a lease company, in which case, you would be the registered keeper.
Another common instance is parents may own a car that they allow their children to use. Therefore, the registered keeper would be one of the children. Some companies won't arrange car insurance online if the owner and registered keeper are different people.
See Screen rates.
Points are added to a license if the driver is convicted of an offence, for instance, speeding. These will increase their car insurance premium as they are seen as a higher risk. See Material facts.
Pro Rata rates
Sometimes, when a policy is cancelled, you will only be charged for the time you were covered by the insurer and not for the full term of the policy.
Protected No Claims Bonus
Some companies will allow protection of No Claims Bonus (NCB). This means you can make a number of claims over a specific period of time without your NCB being reduced.
If you protect your NCB, this does not prevent your premium from rising if you make a claim. When giving free car insurance quotes, most companies rate on claim history as a separate factor.
Protecting the bonus only protects your bonus discount. If there has been a claim, the protected discount is applied but against a higher premium.
If you are looking for car insurance online, see what difference having a protected NCB can make to your premium by comparing free car insurance quotes.
For more information, see No Claims Bonus Explained.
Factors are used by underwriters to determine the price of your car insurance. UK insurers' claims experience determines the effect these factors will have on your premium.
See Owner and Registered keeper.
All car insurance in the UK is offered by assessing a driver's risk. Insurers do this by looking at the details provided and asking how likely the driver is to make a claim. The answer to this is driven by the insurer's experience of claims.
Road Traffic Act (RTA)
This Act governs all car insurance in the UK. It first came into force in 1930 to ensure funds were available to compensate the innocent victims of accidents. It was amended in 1972 to include passengers and again in 1988 to cover third party property.
RTA cover is the minimum legal requirement for car insurance in the UK and covers third party injury or death (both unlimited), property damage up to £250,000 and emergency medical costs.
Offered by brokers as part of free car insurance quotes, these prices come directly from entering your details into their computer. Sometimes they can negotiate on these prices by accessing the insurer directly. In this case, the price would be the Off-screen rate.
Short Period Rates
Occasionally when a policy is cancelled, the driver may be charged a short period rate, which includes an additional charge for the period of cover over and above the Pro Rata rates. These rates are usually worked out on a percentage basis.
See Cover types.
See Cover types.
A tracker is an electronic device (normally fitted as an accessory after purchase of the car) which emits a signal enabling law enforcement agencies to locate the car anywhere in the UK if it has been stolen.
For more information, see How to drive down the cost of car insurance.
Uninsured Loss Recovery (ULR)
The traditional way in which insured drivers protect themselves against uninsured drivers or 'hit and run' incidents is called Uninsured Loss Recovery (ULR) or Legal Expenses Cover (LEC).
This can come as standard on car insurance in the UK. If not, it is normally available for a small additional premium.
It is always advisable to check the small print of the policy document to see if ULR/LEC is included in the basic cover. If you are looking for car insurance online and cannot find this on the insurer's website, call them directly.
It is also important to be aware that most policies offer to track down the offender so your insurer can get the money back through the courts, rather than pay out for the cost of any damage as part of the policy.
For more information, see Legal Expenses Cover explained.
Remember: when arranging car insurance online or over the phone, it is important you have the right use for your car. If you have the wrong use, you may find your insurance company will not pay out on a claim.
The following are the standard types of use for car insurance in the UK:
Social, Domestic and Pleasure
This covers drivers for normal day-to-day driving, such as driving to visit family and friends or shopping.
Covers drivers to drive back and forth to a permanent place of work. Travelling to a railway station, where the car is parked, is classed as commuting.
Covers the car in connection with your job, such as driving to different sites away from your place of work.
Covers the car to be used for such things as door-to-door sales.
The amount a driver chooses to pay in addition to the compulsory excess that has to be paid in the event of a claim. If you decide to bear an additional (voluntary) excess it may bring your premium down but it's a good idea to check if any compulsory excesses already apply to the policy, as voluntary excess is paid in addition to any compulsory excess. See also Excess.