Choosing car insurance

Check the small print to make sure you get the cover you need

The cheapest insurance you can find may not cover your needs

It can be tempting to buy the cheapest insurance you can find but it may not cover your needs. Here's what to look for in the small print.

Cheap deals will have strings attached. If you have an accident, the company may charge you a big 'compulsory excess' – that's the amount you have to pay if you make a claim.

You may find the insurance doesn't cover certain things, like windscreen damage, or driving outside the UK, or the policy might pay out less than other companies.

Make sure the company is authorised and regulated by the Financial Services Authority (FSA). The FSA is the independent watchdog that regulates financial services.

Questions to ask when you shop around

1. What's the difference between third party and comprehensive insurance?

Third party is the minimum cover you can buy and only covers damage or injury to other people and their property, caused by you.
Third party, fire and theft (TPFT) gives additional cover if your car is lost in a fire or is stolen. This is particularly suited to young drivers and older cars of little value
Comprehensive cover includes damage to your own vehicle as well

2. Am I limited to a certain mileage?

On average, UK drivers do around 8,300 miles a year. When asked your annual mileage it's best to be honest – if you have an accident and the odometer suggests you drive a much higher mileage than you disclosed, your insurer could reduce the claim.

3. What other strings are attached?

Depending on factors like your age and driving experience and the sort of car you drive, some companies may require you to make a bigger contribution towards the cost of a claim. This is known as an excess – see below.
There might be strict limits on how much you can claim for personal belongings too, so it's worth checking that your home contents insurance covers personal property outside your home. If you leave things on view in your car and they are stolen, they might not meet your claim at all.

What is an excess?

An excess is the amount your insurance company will withhold from any claim. Typically, it's £100 or £150 but many insurance companies increase this to drive down the price of their policy

Apart from this compulsory excess your insurance company may invite you to agree a voluntary excess. While this will bring down your insurance premium it increases the amount the insurance company will withhold in the event of a claim.

4. What's the limit for legal and medical expenses?

Cover varies so make sure it meets your needs. Some companies don't charge for such cover, others do

5. Will I get a courtesy car if I have an accident?

Not everyone offers a courtesy car and some may offer it as an optional extra only. If you have to shell out for a hire car, at around £120 a week, it can add up if your car's off the road for a while.
Look out for companies that give you a courtesy car for as long as you need it, if yours is off the road after an accident, or if it has been written off or stolen.

6. Am I covered for driving in Europe?

Every insurer must by law provide the minimum – third party – cover in all EC countries, leaving you to meet the cost of damage to your own car out of your own pocket.
You may have to pay extra if you want fully comprehensive car insurance for Europe but should be able to find companies that automatically provide the same level of cover throughout the EU and associated countries.
Some insurers won't offer cover outside the UK at all. If you drive to countries outside the EC you may need a 'Green Card' which confirms that you have cover to drive in the country you are visiting. Check with your insurer first!

7. Will premiums be affected by driving convictions and penalty points?

Depending on the conviction, most insurers will impose an additional premium if you have points on your licence and you must by law tell your insurer about any convictions, at the very least when you renew your insurance.
If you have a second or third offence you can expect your premium to rise sharply and that additional cost will remain for three years, albeit at a reducing rate.
You can also expect a big premium increase if you have been convicted of using a hand-held mobile phone while driving.
If you change insurers, your record goes with you.
Some insurers won't insure drivers with six points on their licence or more.
Drivers with offences for drink-driving or dangerous driving will find it difficult to get cover at all and if they do, it will be very expensive.
If you don't tell your insurer and it subsequently comes to light that you do have a driving offence, your insurer could invalidate your policy

8. What is the maximum no–claim bonus I can get?

The longer you go without a claim, the higher your bonus and thus the less premium you will pay. Typical maximum bonus is 60 or 65%, but some will offer up to 70%.
If you make a claim you may lose some, or all of your bonus. If your claim isn't very large, it might well be worth swallowing hard and paying it yourself – if you lose some of your bonus it might cost more in the long run while you rebuild you no-claim bonus.
Many companies allow you to protect your no-claim for an additional premium. So if you have an accident, you won't lose your no-claim bonus.
If you are a former company car driver and haven't ever made a claim through your company's insurer, ask them to give you a statement to that effect. The insurer of your private car may accept this as proof – not all companies will – and give you a no-claim bonus.

9. Can I get other discounts on my insurance?

Parking on your drive or in your garage should mean a cheaper premium than if parked in the road.
If you are a member of the AA or the Institute of Advanced Motorists, you could get a discount.
If you have retired you will no longer need your car for commuting - removing this element may reduce the premium.
Stick to the speed limit – no points means cheaper premiums
If you significantly reduce your annual mileage you may be able to attract a lower premium

10. Is 'telematic insurance' cheaper?

Telematic or ‘pay how you drive’ insurance such as AA Drivesafe uses a ‘black box’ in the car to measure your driving style.
Drive well – speed, cornering, braking and time of day or night – and you score points that can earn large discounts off your premium. Coupled with no-claim bonus, it is possible for a new, young driver to halve their premium in one year.
If you drive badly, you can expect to see your premium increase.
You can track your performance on a ‘dashboard’ on your computer or via a free App.
Pay how you drive’ insurance is best suited to those paying high premiums such as young drivers.
If you're an experienced driver you are unlikely to benefit unless you have lost your no-claim bonus or suffer a high premium because of driving convictions in which case telematic insurance could help get your premium back down faster.

(1 March 2013)