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Car insurance policy types explained

Benjamin Franklin’s quote that “nothing is certain but death and taxes” missed out a third certainty – insurance. When we drive anywhere, we need it. But which policy is right for you? 

Choosing car insurance is often overwhelming. We all want the best blend of protection and price. After all, if you drive a car you must be insured to drive it – it’s a basic legal need. Here’s what you need to know.

Model car surrounded by insurance documents

Let’s look at the main options first to get a sense of how things are organised. There are three car insurance types:

 

Third-party only

Third-party only (TPO) is the legal minimum for getting on the road. It’s the most stripped-down, back-to-basics protection possible.

What does it include? If you bump or scrape another car or injure the driver and passengers in a car accident, your third-party insurance policy should pay the repair and injury costs.

Third-party cover also covers you for any property damage caused by your driving. 

So far, so good. However, third-party cover tends not to include a range of other driving risks, such as:

  • If you or your passengers sustain accident injuries 
  • Any accident costs to your vehicle. This means if you have an accident and your car’s badly damaged, you might be forking out all the repair costs 
  • If your car’s stolen you’ve got no protection for a replacement. 

If you’re involved in an accident that isn’t your fault, the other driver’s insurance should pay any compensation owed to you. 

But your insurance company might not show much interest in supporting you with this claim.

So, third-party only insurance is limited cover. 

For some it might do the job. But it might not supply the peace of mind you want when out and about.

 

Third-party, fire and theft

With third-party, fire and theft (TPFT) cover, you get all the benefits of  third party cover. In other words, you’re covered if you run into another vehicle, or damage their property. 

Also, you’ve got protection if there’s any injury to the other driver and passengers.

Third-party, fire and theft protection adds on top:

  • Fire damage protection to your car including any arson attempt – a crime reference number might be needed here
  • The replacement cost of your car if you’re a victim of car theft
  • The cost of any damage to it if someone attempts to steal it

While these extra protections are added, TPFT still might not give you:

So, while there’s some extra cover bolted on, the gap between TPFT and fully comprehensive cover is still pretty chunky. There’s also still no protection for you if an accident is your own fault. 

 

Comprehensive cover

Comprehensive car insurance offers you the broadest range of protection for a wide range of driving risks.

A ‘fully comp’ policy should cover you for everything included in a third party, fire and theft policy. It should also cover you for accidental damage to your own car, even if it was your fault.

For most of us, that’s the real stand-out benefit of a comprehensive insurance policy. Simply, it gives extra peace of mind when we’re out on the road.

Comprehensive insurance gives you the benefits of third party, fire and theft, plus:

Cover for repair costs for your own car after an accident, even if it’s your fault

The cost of treating any accident-related injuries for you and any passengers

Damage protection to your car, even if you don’t know whose fault it is

The option to drive someone else's car, sometimes – though this cover is normally limited to third party cover only.

 

What does comprehensive cover not include?

While comprehensive policies cover most eventualities, there are some exclusions.

So you might want to consider some padding to your policy in some areas.   

For example:

  • Breakdown cover. Some policies might not include it. Instead, an insurer might offer it as a ‘bolt-on’, which comes at an extra cost. 
  • Courtesy car cover. If your car needs repair or is written off, some insurers might offer you a basic vehicle to keep you mobile. Not all insurers offer it.
  • Windscreen cover. It’s great to have it but not all include it in their ‘fully comp’ terms.
  • Legal expenses cover. It  offers extra peace of mind. There’s a lot of different types - from personal injury to loss of earnings. Plus protection from court fees. However, this might only cover you if there’s a reasonably strong chance of winning your case. 

The specifics of what you could be covered for might vary between insurance companies, as might the price.

So, it’s even more important to compare comprehensive policies. The cheapest might not always be the best. 

And a basic, cheaper policy could end up costing more stress, time and money in the long run. 

These three car insurance types cover your average policy. But there are also specialist options, depending on your circumstances.

 

Learner driver insurance 

Learner driver car insurance allows you to hone your skills before passing your driving test. You still need a qualified driver with you when you’re on the road though.   

What to consider?

If you’re already having driving lessons from an instructor you don’t need learner driver cover. It’s included in your lesson fee.

You can get learner driver cover for just a day or much longer – perhaps several months. 

If you’re learning in someone else’s car, using a temporary learner driver policy is less likely to impact their no-claims bonus.

Learner driver insurance isn’t the only way to support your driving confidence pre-test. You might want to consider asking someone to add you on their own policy as a named driver
If you get behind the wheel and have a bump their no-claims bonus might be affected. So, perhaps shop around for both options, if they’re open to you.   

 

Telematics and black box insurance

Black box insurance, sometimes called telematics insurance, involves a small communications device that sitting in your car and measuring your driving style. 

This black box sends the info to your insurer who measures how safe your driving is. Your premium could consequently rise or fall. 

Passing your test is thrilling but car insurance costs less so – and insurance is usually high for young drivers. Black box car insurance tries to crack this costs barrier. 

Does it succeed? It depends on you. If you’re a young driver and you build up a safe, responsible driving profile then black box cover could save you cash. 

It’s also worth considering:

  • A telematics device could help you track down your car if it’s stolen 
  • They’re a good way to start building up your no-claims bonus
  • Be careful if you’ve got a second driver on your policy. A telematics device doesn’t know who’s driving. If you’ve a friend with bad habits, you might end up paying for them!
 

Temporary car insurance

This is short-term car insurance cover that can last from one hour to a month. 

Perhaps you need to borrow a car once a month for an hour – perhaps for shopping. Or half a day twice a year. Perhaps to support a relative or friend in a care home. 

Temporary car insurance could even be priced in single minutes – so it’s super-flexible. The other thing is that there’s no contract. Once the cover has ended, you’re done. 

Temporary cover could let a friend borrow your wheels, or allow someone to help you share the driving on a longer trip. Some garages also use it for test drives. 

It’s easy to get a quote online, although if you’re under 25 you might face some exclusions.

 

Classic car insurance

Classic car insurance is specialist protection for a classic car. If you’re lucky enough to own one you probably drive it less than your day-to-day wheels. 

There might be age limits on the car for it to be considered a ‘classic’ – usually any car older than 15 years falls under the classic umbrella.

If you run a classic car then you might belong to an owner’s club. This could help keep the cost of your cover down.

If your classic car is written off, it’s not so easy to get a valuation. That means an insurer might ask you for an agreed valuation when you take out your policy. This could increase your insurance costs.

If your car is no longer driven on the road, consider laid-up cover. 

You should still be covered for fire and theft should the worst happen. But if your classic car isn’t being driven at all, you might want to consider giving it a SORN.

 

Excess on car insurance

You have to pay the first part of any insurance claim, and this is called the ‘excess’.

So if the insurer imposes a compulsory excess on your policy of £200 and then agrees to settle a claim for £2,000, you get £1,800.

Sometimes an insurer might waive your excess if it can claim the equivalent amount from the other party. This is so long as the accident  was the other driver’s fault, although not all insurers automatically do that.

The higher the excess on your policy, the cheaper your premiums usually are – and you can sometimes bring your premiums down further by opting for a voluntary excess, too.

Your policy might come with a compulsory excess of £200, but if you add a voluntary excess of £200, it means that you get £1,600 from a £2,000 claim – you’ve effectively paid the first £400 yourself.

Before signing up for a voluntary excess, find out from your insurer how much it could reduce your premiums by.