What is car insurance?

Car Insurance is a legal requirement.  As a responsible driver you will no doubt be aware that having insurance for your vehicle is mandatory, but, due to the terminology used by insurers, you may not have a complete understanding as to what exactly it is and why you need it. From the kind of car you own, your driving history to your budget, there are a number of factors you have to take into consideration before you purchase your policy. With this Car Insurance guide we’ll walk you through all you need to know to help you gain a clearer understanding of what car insurance is, and how you can get the best policy for you.

Why do I need Car Insurance?

All motorists are required, by law, to insure their cars. Put simply, this provides financial protection in the event of an incident which causes damage or injury to another person, vehicle, property or animal. Depending on your policy type, this may or may not include repair costs for damage to your own vehicle as a result of the incident, theft of the vehicle and damage to the vehicle caused by other reasons. The only cars that don’t need to be insured are those cars that are registered as off-road with a Statutory Off Road Notice (SORN).

Buying Car Insurance means purchasing a policy. The first step to getting this policy is filling in the application form making sure you answer the questions as accurately and as honestly as possible. Failure to do so can invalidate your insurance and result in your insurer refusing to pay out if you make a claim and even withdrawing your policy. The questions you will need to answer will be on a number of different areas, all of which help insurers determine the price to cover you, i.e. your insurance premium.  

These questions will include:

  • Vehicle type and age – An expensive new high-powered sports car will cost you more to cover compared to a ten year old 1.0 litre hatchback.
  • How the vehicle is used – Needing to drive regularly during rush hour or having higher than average mileage can increase your premium. Similarly if your vehicle will be used for business purposes, aside from commuting to and from a single place of work, this may cause an increase in premium.
  • Age - Being a young and inexperienced driver can result in higher costs.
  • Driving history – Penalties on your licence or convictions, crashes and claims can raise your premium.
  • Voluntary excess - Offering to pay a higher excess amount on top of the compulsory amount set by the insurer, which will apply should you make a claim, can lower your premium.
  • Where you live - Living in a high crime area can negatively impact your insurance cost.
  • Additional drivers – adding young or inexperienced drivers to your policy is likely to increase your premium.

When purchasing your cover it is important to remember that there are three main policies types to choose from:

  • Third-party only or TPO - This policy is the minimum legally required level of coverage for motorists in the UK. It covers liability for injury to others, whilst towing a caravan or trailer and damage to third-party property.
  • Third-party, fire and theft or TPF&T - This policy includes all third-party insurance coverage, but also includes theft of your vehicle, damage to your vehicle during theft and fire damage.
  • Comprehensive policy - The most wide-ranging coverage that includes everything covered by third-party, fire and theft along with medical expenses, personal effects, accidental damage, windscreen coverage and loss of or damage to your vehicle.

Once you’ve received your paperwork it’s important to keep your insurer up to date with any changes in your circumstances to ensure your policy is valid. Likewise, in the event of an incident or if your vehicle is stolen, you must contact your insurer immediately, even if you are not making a claim.

RAC Car insurance

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RAC Insurance is a trading name of RAC Financial Services Limited. Registered in England and Wales No. 5171817. Registered office: RAC House, Brockhurst Crescent, Walsall, WS5 4AW. RAC Car Insurance and RAC Home Insurance are arranged and administered by BISL Limited, which is an independent intermediary. Registered in England no. 3231094. Registered office: Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS. Both companies are authorised and regulated by the Financial Conduct Authority.