What is motor insurance ?
Motor insurance (also known as auto insurance, car insurance or vehicle
insurance) is a type of insurance for cars, motorcycles (including mopeds and
sidecars), vans and other motor vehicles. Motor insurance provides protection
against:
losses incurred as a result of a traffic accident.
liability that could arise from an accident involving your vehicle.
theft and/or damage caused by fire (depending on policy type).
Motor insurance is renewed annually and is
required by law if you want to use a vehicle on a public road,
this has been the case since the 1930's.
Today every vehicle must be taxed if used or kept on a public road. In order to
tax your vehicle, you must have insurance that covers you against:
third party claims for death or injury.
damage to property caused by the vehicle
There is a distinction between vehicle 'users' and
'drivers', motor insurance indemnifies (provides cover to) the 'user' rather than
the 'driver', so the insured user of a vehicle doesn't have to be its driver!
However, even if you are not the driver of the vehicle, you must have a
financial interest in the vehicle you are insuring, for example you can't take out
insurance on your boss's vehicle then claim if they crash! You have to have
an insurable interest, i.e. show that you would suffer financially if your motor
vehicle was stolen or damaged, for example if you owned the vehicle or were
paying a loan on it.
How does motor insurance work...
In insurance terms, there are several parties (people) involved when a motor
insurance claim is made, these are known as:
First party - vehicle user (person insured).
Second party - company providing the insurance
cover (the insurer).
Third party - person or people who suffer a loss or
injury as a result of your vehicle.
Motor insurance is designed to put you back in the same
position financially that you were in before an insured loss
occurred. In addition to the minimum insurance cover
required by law, this booklet looks at the other types of motor
insurance available to private (non-commercial) vehicle
users, to enable you to make an informed decision about
what cover is right for you
Why you might need motor insurance ?
Apart from having to be insured by law there are several other very good
reasons to have motor insurance. Insurance provides you with cover for all of
the risks associated with using a vehicle.
If you are involved in an accident where people or their
property is damaged, you may have to pay thousands of
dollars of compensation.
Perhaps you may need to replace your vehicle if it has been deemed to be
unroadworthy or need repairs if damage occurs to it. Other situations where
additional motor insurance can protect you are:
When you....
Hire a car
You should know that........
Hire car rental agreements only cover collision damage
waiver (CDW) and theft, a car hire excess is payable if a
rental car is damaged or stolen. Additional Car Hire Excess
insurance is available from most vehicle insurers and will
pay your car hire excess in the event of a claim and also
cover damage to windscreens, windows, mirrors, the roof,
undercarriage and tyres which are not usually covered in
standard rental agreement insurance.
When you....
Drive abroad
You should know that........
While most insurance will provide the minimum level of
cover legally required in having
additional breakdown insurance will cover vehicle
recovery and replacement costs and repatriation of the
vehicle. Inform your insurer before you drive abroad. Your
motor insurance company should give you a green card to
prove you and your vehicle meet local motor insurance
requirements, which is internationally recognised.
When you....
Own a Camper Van
You should know that........
You are combining your vehicle and your home which can
double the risk of loss. You may need additional contents
insurance to provide cover for things that don't fall into the
category of ‘fixtures and fittings'.
You have made a financial investment when you buy a car, motorcycle or
other motor vehicle, and that investment needs to be protected. Your legal
obligations when you use a vehicle on public roads are also extensive, so it
pays to get as much insurance cover as you can afford!
What are the different types of motor insurance ?
Regardless of the type of motor vehicle you have there are just four basic
types of motor insurance policy available in the UK, these are outlined in the
table below for you as a quick reference guide:
Insurance policy type
What it covers
- Act Only
What it covers
An absolute minimum policy to be legal, only covers third
party liability on any public road. Very limited cover which
doesn't cover damage to property, only really suitable for
people unable to obtain other forms of cover, maybe because
of a poor driving record.
- Third party insurance
What it covers
Covers the insured person when they are driving on private
and public property and roads. In addition to third party
claims, it provides cover damage to property and legal
liabilities such as passenger indemnity. For example if your
passenger opens your car door and knocks over a cyclist,
you are covered. You're also covered for legal costs.
- Third party fire and theft
What it covers
The same as third party insurance, but with additional cover
for damage or loss caused by an attempted or actual theft, or
a fire. A cheaper alternative to comprehensive cover when
you have an older vehicle, which doesn't need to be covered
for every possible risk.
- Comprehensive
What it covers
This is the widest cover you can get, it provides the same
cover as the three types above but with the addition of
accidental damage cover, which means you can get your
vehicle repaired if it gets any kind of damage, not just
damage due to theft or fire.
Even if you have a Comprehensive policy
not ALL risks are covered by it, despite it's name!
Therefore on top of these basic policy types there are several optional extras
you can add on to your policy for an additional charge, depending on type of
vehicle and your specific needs. The most common types of optional extras
available are outlined in the table below:
Extra cover type
- Personal accident cover
Description
Extra benefits in the event of an accident, i.e. if you suffer
injuries like a loss of sight or a limb or maybe death. If
people sustain an injury in your motor vehicle, you can get
medical cover for them.
- Limited mileage cover
Description
By committing to only doing a certain number of miles per
year you can keep your motor insurance costs down. If
you spend your time in one spot in your camper van you
could make substantial savings.
- Courtesy or hire vehicle cover
Description
This insurance will pay for a courtesy or hire vehicle If
you're unable to use your vehicle through theft, an
accident or having damage repaired.
- Additional legal expense cover
Description
Enables you to make a legal claim against another party,
for example reclaiming your policy excess, costs of
damage to possessions in your vehicle, travel expenses,
compensation for injuries and loss of earnings.
- Breakdown cover
Description
Covers the costs of roadside assistance and recovery of
your vehicle if you breakdown. If you breakdown while you
are travelling it might be in the middle of nowhere!
- Windscreen cover
Description
Covers the cost of replacing your windscreen if it gets
cracked or broken. Van windscreens can cost into the
thousands to replace.
- Extended cover for driving abroad
Description
Automatically provides the same level of cover for driving
in the US as when you are in the USA, don't have to let
your insurer know when you go abroad. Covers you for up
to 90 days away per trip.
- Multiple vehicle or driver cover
Description
You can cover more than one vehicle, or name more than
one driver on your policy. Several insurance providers
offer substantial discounts if you are intending to insure a
fleet of vehicles.
- Voluntary excess cover
Description
You can lower your monthly or annual premium amounts
by opting to pay a larger excess in the event of a claim.
No claims bonus
protection cover
Protect your no claims bonus and prevent it from being
reduced or removed in the event of a claim.
- Payment protection cover
Description
This cover pays your regular monthly or annual premiums
in the event you can't pay them due to accident, sickness
or redundancy.
Motorcycle insurance
Although the same basic insurance policies, third party, third party fire and
theft or comprehensive are used to insure motorcycles, they are classed
differently by insurers and packaged under two types of motorcycle insurance
cover:
Type of motorcycle cover
- Specified rider policy
Description
Most common type of motorcycle insurance, which
covers the rider rather than the bike, allows you to ride
any motorcycle up to a particular size. Cost depends on
age, experience and skill. Some motorbike insurers
enable you to build up no claims discounts depending on
the amount you yourself claim as a rider.
- Specified bike policy
Description
This insurance covers the motorcycle not the rider, if you
want to insure multiple people for the same bike. Cost
depends on type of bike, i.e. an old bike with not a lot of
value will be cheaper. Sometimes you have to name the
riders who will use the bike. Any no claims insurance
depends on the bike itself not being stolen or involved in
an accident.
Motorcycle insurance premiums are higher than other types of motor
insurance because motorcycles are smaller than other road vehicles which
makes it harder for other drivers to see them, and therefore are more likely to
be hit.
Motorcycle premiums are also higher because of:
high theft rates and personal injury claims
courts awarding higher compensation payments to victims of accidents
NHS policy to pass on costs of treating accident victims back to
insurance companies.
Motorcyclists don't have the physical protection of an enclosed vehicle so are
also more likely to need extra cover for:
personal possessions, for the cost of replacing clothing such as
leathers
legal expenses, for claims for personal injury or loss of earnings personal
accident, to insure against injuries caused directly from an accident added
compensation, if you need to spend time in hospital specialist repair and
towing equipment for roadside breakdown assistance.
Insuring a motorcycle for use in the centre of a city will also cost more than
outside a city. You can reduce your motorcycle insurance costs by:
keeping your annual mileage low
having a low value bike
owning your bike for a long period of time
not claiming for a certain amount of time
attaching a sidecar permanently to give it more balance and make it
more difficult for it to be knocked over.
keeping motorcycles in a locked garage overnight and fitting them with
added security measures such as alarms or ground anchors.
Some mainstream motor insurers won't insure motorcyclists at all, whilst some
will only provide insurance at a very high cost with a lot of restrictions. Young
motorcyclists are even more likely to have accidents and therefore find it very
hard to get motorcycle insurance, motor insurance companies normally only
insure riders over 25 years old, riding smaller bikes. Its a good option to go to
specialist motorcycle insurance companies.
Motorcycle insurance companies are set up to cater specifically for bikers.
They are usually staffed by people who are bikers themselves and know the
motorcycle insurance business, which means you get helpful and expert
advice. They are likely to be able to cover all types of motorcycles and
scooters. A motorcycle insurance broker can also help you find the right
insurance. You can explain your needs to them, and they attempt to arrange
the lowest cost insurance that fully covers your needs. They help you get a
fuller overview of the market, and can save you time too.
Many motorcycle insurance companies have an online enquiry service for you
to request a quote, even allowing you to apply for insurance online at the
same time. Others will get back to you within 48 hours with a quote, or you
can call them.
Some specialist motorcycle insurance companies also offer auxiliary services
that support motorcyclists, for example:
personal loans to help you buy the bike
motorcycle lessons to help you become a better biker
breakdown services with specialist motorbike repair crews
bike manufacturer insurance, likely to be more specific to your bike
When looking for motorcycle insurance
It is important to research the market and get as many quotes as possible to
find the most appropriate, best value deal. Some motorcycle insurance
companies may give you a no claims bonus, and for a small fee, offer
protection for that no claims bonus. However, not many insurance companies
actually offer no claims bonuses for motorcycle insurance.
Riding a bike without insurance is
breaking the law.
But also, if you are involved in a crash
in which someone else is hurt, they
have the right to sue you, which could
cost thousands of pounds once it's
gone through the courts, so having the
appropriate motorcycle insurance is a
very good idea!
Understanding how your motor
insurance premiums are calculated
Motor insurance is a difficult product to compare, it isn't possible for insurers
to advertise their prices directly because everyone pays a different price for it,
even if they are insured for the same motor vehicle. Making sure you
understand the factors that affect what you pay for motor insurance is very
important before you start shopping around.
Insurers calculate their motor insurance premiums taking into account the
following things:
What this means..... Reduce your premiums by...
- Your Age
What this means.....
Young or inexperienced
drivers are seen as high risk. A
compulsory excess is often
charged to young drivers.
Reduce your premiums by...
Looking for rapid or accelerated
bonus schemes to build up no
claims bonus entitlements quickly.
Doing the Pass Plus training
scheme for new drivers, designed
by the Driving Standards Agency.
- Your Gender
What this means.....
Male drivers are seen as
higher risk. Female drivers
take fewer risks, don't drive as
fast and have less serious
accidents, so are classed as
low risk.
Reduce your premiums by...
Using insurers who just specialise in
covering female drivers avoids
subsiding higher risk customers in
the marketplace.
- Your vehicle type and value
What this means.....
The age, model and engine
size of your car is one of the
main criteria used in
calculating a premium.
Reduce your premiums by...
Having a smaller, low powered car,
or using a specialist insurer for your
classic car, high performance or kit
car.
- Your annual mileage
-What this means.....
Low mileage, i.e. less than
6,000 miles per year means
lower premiums. Extra drivers
or changing jobs can affect
your annual mileage.
Reduce your premiums by...
Keeping an accurate record of your
annual mileage by checking
consecutive M.O.T. certificates to
get a benchmark of your mileage.
Look out for restricted mileage
clauses.
- Your number and history of drivers
What this means.....
Any driver policies are
expensive. Named driver
policies are cheaper. Previous
accidents and driving
convictions will increase your
premiums.
Reduce your premiums by...
Only insuring those drivers who
regularly use your vehicle.
Maintaining a good driving record.
- Your medical history
What this means.....
An important issue when
determining how much you will
pay, for example whether you
wear glasses or not or have
had a stroke or heart attack.
Reduce your premiums by...
Looking after your health!
- Voluntary excess
What this means.....
The 'excess' is the amount you
agree to pay towards settling a
claim. If it's determined not to
be your fault, the excess is
refunded to you.
Reduce your premiums by...
Agreeing to pay a higher excess
amount.
- Your vehicle's security
What this means.....
If your vehicle is fitted with an
alarm, immobiliser or tracker
system it is less likely to be
stolen. If you live in a high
crime area your premiums will
be higher.
Reduce your premiums by...
Keeping your vehicle in a locked
garage, or in off street parking.
Fitting a security device.
Being aware of how you and your vehicle are classed by insurers will help you
determine where to start looking for motor insurance quotes, however if you
fall into the largest category of people looking for motor insurance, i.e. you:
have a reasonably good driving history
own modern US standard specification vehicle
want to use it for normal day to day activities
Then mainstream motor insurers advertising on the high street, in magazines,
newspapers, on the radio, on TV and online are a good place to start.
Shopping around for your motor insurance
Mainstream motor insurance is widely available from:
Most banks & building societies
Supermarket chains
The Post Office
Independent car insurance brokers
Finance companies
Motor insurance companies
If you are female or under 25 years old look out for offers or special deals
aimed specifically at you. For example, if you are a young biker, some
insurance brokers will offer you a cheap quote as they have already
negotiated deals with some insurance companies
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Motor Insurance
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