Working with the profession to simplify the language of insurance

CAR INSURANCE MADE SIMPLE

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WHAT IS CAR INSURANCE?Car insurance, also called motor insurance, protects you if you are involved in a collision or injure someone or damage their property. It may also protect you if your vehicle is damaged by fire or if it's stolen or vandalised. Car insurance can significantly add to the cost of running a vehicle, but by law anybody who owns a vehicle must have car insurance, even if the vehicle is just parked in the street or a garage and not being used. The only exception is if you send a ‘SORN’ declaration to the DVLA to tell them that you don't use or keep your vehicle on a public road. Here's how to choose the right policy.

How to buy the right car insurance policyStart by choosing the insurance that suits you and your car. There are essentially three levels of cover:

Third-party,fire and theft

Third-party

Comprehensive

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What do they mean?Comprehensive insurance As the name suggests – will provide you with the broadest protection. It is the most popular policy for motorists and will pay compensation to a third-party if you kill or injure someone else or damage their property. But it will also pay out if your own vehicle is damaged in an accident, stolen or vandalised. This may be more expensive than other types of cover but gives most security and is a must if you have a valuable car.

Third-party insurance This only covers the costs of any claims that are made against you if you kill or injure someone else or damage their vehicle or any other property with your car. It will not pay out if your own vehicle is damaged. This used to be the cheapest option and may be suitable if your car isn't worth much. However, the price gap between third-party and comprehensive has been squeezed. Consider carefully, whether the saving is worthwhile.

Third-party, fire and theft This includes all the cover provided by third-party insurance, but also pays out if your car catches fire, is damaged by theft or is stolen. The cover provided is not as broad as a comprehensive policy and it is significantly less popular than comprehensive cover, accounting for only one in ten policies sold.

Checking what insurance group a car is in before you buy itEvery car in the UK is assigned an insurance group. The lower-risk group your car is in, the lower your premiums will be. The groupings take into account things like performance, safety, security, cost of replacement parts and repair costs – many of the things you’ll want to research before you buy anyway.

Tip: You can check the insurance group of your car using the Insurance Group Rating section of the Thatcham (Motor Insurance Repair Research Centre) website – thatcham.org/what-we-do/group-rating.

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How you affect your premiums• Your age affects how much you'll pay. For instance, someone who's in their 20s will pay more than someone in their 50s who is considered to be more experienced on the road.

• Your job also affects premiums. For example if you travel regularly as part of your job, there is a greater chance of you having an accident.

• Your sex. Until an EU gender ruling in 2012, women's premiums were generally cheaper than men’s. Statistics showed that females made less claims and so were considered to be safer drivers. However, insurers are no longer allowed to take your sex into account, so women's insurance costs are now in-line with men's.

• Your postcode. Some areas, such as inner cities, have more car thefts and motor accidents than others, so premiums are higher. For instance Greater Manchester (M) is more expensive at £820 for an average comprehensive policy than south-west Cornwall (TR) at £279, according to AA Insurance research.

• Where you park. If your car is parked in a garage or on a drive way your premium will be lower than if it is left on a street overnight.

• Your driving history. Your motoring record including previous claims and convictions will have an effect on your premium. It's essential you notify your insurer of any convictions including speeding tickets as soon as possible and not wait until renewal, otherwise you could invalidate your policy.

• No-claims discount. If you don’t make a claim you are rewarded via a hefty bonus called a no-claims discount.

• Excess. This is the amount you agree to spend before the company must pay. Most policies have a compulsory minimum excess, and you can chose a voluntary one on top.

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How can I cut costs?There are many ways you can drive down your premiums:

• Choose the cheapest way of paying. If you can, avoid paying by installments as some insurers add interest to your repayments. However there are some insurers who don't charge extra for paying this way, so shop around.

• Opt for a bigger excess. Most policies have a compulsory minimum excess; the amount you pay in the event of a claim. You could reduce your premium by increasing the 'excess' – but you will have to pay more if you have an accident. Just make sure you can afford this sum should the worst happen.

• Avoid small claims. If you make a claim, you'll push up your insurance premium, as you will lose some or all of your No Claims Discount. For minor incidents, this can cost you more than you get back from insurers paying your claim. However, you must report any accidents to your insurer even if you don't plan to claim.

• Give your insurer full information. Don’t forget to tell them about things that will make you more attractive to insure – even if they don’t ask you about this. For example, let your insurer know if you're doing less annual mileage. A lower mileage, generally less than 6,000 miles a year, is usually rewarded with lower premiums.

• Invest in security. Most cars now come with alarms and/or immobilisers but if not, fitting one may lower your premium. Depending on the quality of the device and if it's on the insurer's list of approved makes, this may entitle you to a discount.

• Consider telematics or fitting a black box in your car. This allows you to pay a personalised price based on how and when you drive, so the safer you are, the less you pay. This is particular useful if you're a younger newly-qualified motorist so you can demonstrate you're a safe driver.

• Pay-as-you-go insurance. Try pay-as-you-go insurance. You're usually charged per mile driven, so this might be worth at a look at if you don't rack up too many miles. Again, this might be particularly useful for new drivers wanting to build up a safe motoring record while lowering insurance costs.

• Add another driver. Adding a more experienced parent or partner or spouse to your policy can reduce the cost – but you must be careful not to mislead insurers about how the car is used. However this may not be worth doing if the more experienced driver has points on their driving licence.

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• Go easy on the modifications. Adding spoilers or alloy wheels will mean higher premiums – so consider if saving money is more important than your street cred.

• Garage your car. Some insurers will give you a discount if your vehicle is garaged overnight.

• Insurance for older drivers. Several insurers specialise in offering cover for older drivers, typically from age 50 and over, including the likes of saga.co.uk and ageuk.org.uk. However these might not necessarily be the best deal, so shop around.

• Stay within the law. Adding penalty points to your driving licence pushes your premiums up. Insurers won't cover you if you drive under the influence of drink or drugs.

Don't forget that whilst there are lots of ways of reducing the premium you pay, it is important that this is not at the expense of having the right cover for your needs.

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Courses to lower premiums• New motorists could save on their insurance by doing extra training with Pass Plus (gov.uk/pass-plus/overview).

• Experienced drivers could save by taking an advanced driving test. Find out more from the Institute of Advanced Motorists (iam.org.uk).

Of course, it's worth weighing up the cost of these versus what you might or might not save on your premiums.

You could save on your insurance by

doing additional training

What is NCD?A no-claims discount (NCD) also known as a no-claims bonus (NCB), is a premium discount which rewards you for not making a claim.

For every year you're insured and don't claim you'll earn a discount off your annual premium. Rates vary but discounts of 25% for one year of free claims and up to 65% or 70% for four to five years free of claims are common. So check what your insurer offers.

It's worth considering paying to protect your NCD. Depending on the insurer you're allowed to make a certain number of claims within a set time period before you lose your NCD.

NCD is not ordinarily linked to who’s to blame for an accident. So, for example, if you park your car and come back to find it has been hit by an unknown driver, if your insurer pays out for the damage, you will lose some or all of your NCD even though the accident was not your fault. You can also lose your NCD temporarily while insurers argue over who was to blame for an accident or while they recover their costs from the responsible party. Providing they get all their money back they will normally reinstate your NCD and refund you any money you might have overpaid.

Tip: If you swap insurers your new provider will want to see evidence of your NCD so it can be applied to your policy.

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NCD of 25% for one yearof free claims and

up to 70% for five yearsare common

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What to watch out for• Fronting. Insuring younger drivers can be expensive. However, if a parent is put down as the main driver on their child's car this is called "fronting" and is illegal. Parents can be included as an additional driver on their child's policy which may help to lower his or her premium. For tips on how to drive down car insurance for younger drivers, see our new drivers' guide.

• Tell the truth. If you don’t you will invalidate your policy. Report any motoring convictions immediately – don't wait until your policy renews – and don't adjust your job title to get a cheaper premium. You could be left out of pocket if you have to make a claim.

• Business use. If you do not use your car for business, you will need the standard 'social, domestic and pleasure' cover. However, if you use your car occasionally for work trips, make sure you also opt for business use. It might not affect your premium cost, but will cover if you have an accident while away with your work.

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How to get a competitive quote• Comparison websites. One way to get a good deal on your car insurance is to use a comparison site. There are lots to choose from and you can also compare the cover each policy offers and tailor the policy by, say, increasing or lowering the excess.

Tip: Consider whether you need features such as a courtesy car if your vehicle has to go into the garage to be repaired after a collision. Or do you want to include breakdown cover or legal expenses cover (covers costs associated with certain legal actions which you might already have on your home insurance policy).

All of these factors will increase your premium. Remember to read the small print.

• Direct insurers. It's worth bearing in mind that not all companies are on comparison websites. So it might be worth trying these companies separately for comparison.

• Insurance brokers. Insurance brokers and other insurance intermediaries can research the market for you. You can contact them by popping into one of their high street offices or by phone. Many also have websites where you can input your details to get a quote. Brokers are professionals and are especially good if your circumstances, or vehicle, are a little out of the ordinary.

Don't auto-renew When your policy comes up for renewal, never let apathy get a grip and simply let your insurer auto-renew. You could find yourself out of pocket, especially if you haven't switched insurers for a number of years.

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If you’re in a collisionMake a note of as many details as possible at the scene of the accident. It’s amazing how much you forget afterwards. Try to include things like:

• Photographs of any damage to the vehicles involved• Details of the other driver and the number of passengers• The date and time of day• The weather• The state of the road; for instance icy or dry• The names and contact details of any witnesses

You should also remember the following:• Swap insurance details and your name, address and contact details with the other driver• Call the police if you're concerned• It's essential to contact your insurer to report the incident as soon as you can.

If you are in a collisioncall your insurer as soon

as you can

Who pays?If you are involved in an accident, your insurer will need to look at the accident circumstances to decide who was at fault (who caused the accident) and so who should pay for any injury or damage caused. In many cases the accident circumstances will be relatively straight forward and it will be clear which insurer should pay.

However, some situations are more complicated. Even if you are sure that you did not cause the accident, the other side may dispute this. After considering the circumstances further and taking into account any legal considerations, your insurer may decide that you were in fact partly responsible for the accident – or it may be impossible to prove either way, particularly if there were no witnesses. In these cases your insurer may have to agree to share the cost of any claim with the other insurer. Your insurer will be there to handle any negotiations for you.

Watch points• Don't take your car to be repaired without your insurer's prior approval as they may not reimburse costs. Insurers use approved garages where the damage can be assessed and repairs carried out and paid for quickly by your insurer.

• If your car is written off or stolen and not recovered, the insurance company will pay out a sum of money equal to its value before the incident. Cars depreciate in value at an alarming rate so this figure is likely to be less than the purchase price of the car. If you think the figure is unfair, provide your insurer with evidence of why you think it’s worth more and ask them to reconsider.

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Driving your car and insurance overseas If you drive your car abroad to EU countries, your UK motor insurance policy automatically provides the minimum cover required by the country being visited – usually a form of third-party cover. But you can ask your insurer to extend your policy to provide full cover for overseas driving for the duration of your trip for an additional premium. For more on insurance and driving your car abroad see our guide to driving abroad.

Did you know: Around 30,000 claims are made to the Motor Insurer's Bureau each year caused by uninsured drivers. Luckily, the MIB will compensate the victims of uninsured drivers but it says this adds £30 to every honest motorist's premium. The insurance details of all vehicles which are insured are recorded on a central database called MID (the Motor Insurers Database). You can check the MID database to make sure your vehicle is shown on it via askMID.com.

It's a fact: If you're a registered keeper of a vehicle, insurance is a legal requirement. If you don't have cover you could face a £100 penalty, your vehicle being seized or destroyed, court prosecution and a fine of up to £1,000. It's not worth the risk!

Remember if you have any questions about car insurance, just ask me, Ciindy ataskciindy.com

@askciindy

/AskCiindy

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