Having car insurance is a legal requirement and with the right level of cover, provides financial protection in the event of your vehicle being damaged. It will also provide cover for injuries to other drivers, passengers or pedestrians, and their property.
Accidents happen, so it’s reassuring to know that you’re covered financially if you’re involved in one.
The good news is that premiums are falling, reflecting the commitment of insurers to pass on the savings from reforms in the civil litigation system in 2013. For example, by legislating to protect insurers from fraudulent whiplash claims and claimant lawyers’ excessive costs, insurers are now able to be more competitive with their prices.
Figures from the Association of British Insurers show that the average premium paid in the first quater of 2015 was £360, down 2% on the last quarter of 2014.
Why is car insurance necessary?
Having car insurance is essential because it covers your expenses in the event of vehicle damage or injuries to other drivers, passengers or pedestrians.
All motorists must be insured against their liability to other people, as stipulated in the Road Traffic Act 1988.
Insurance can also provide financial support if your car is stolen, vandalised or destroyed by fire.
The only instance in which you don’t need it is if your vehicle has been declared off the road through a Statutory Off Road Notification (SORN) from the DVLA.
What if I’m not insured?
Driving without car insurance is illegal. If you don’t have it, you could be fined or disqualified from driving.
The maximum fine is unlimited, plus you'll receive six to eight penalty points on your licence.
The Government is currently reviewing penalties for uninsured drivers who kill or are involved in accidents.
The police also have the power to seize and destroy any vehicle being driven without cover.
Types of car insurance
There are three levels of cover you can choose from - third party; third party, fire and theft; and comprehensive.
Third party - This is the bare minimum required by law, but isn't always the cheapest. It covers injuries to other people and damage to others property.
Third party, fire and theft - This is the same as third party but also covers the cost of repairs or a replacement vehicle if your car is stolen or damaged by fire.
Comprehensive - This is the highest level of cover you can get. It protects against damage to your own car as well as accidents involving other people. It can also include a courtesy car and legal expenses insurance; however this may be at an additional cost.
Your insurer may also allow you to add named drivers to your policy who can also drive your car, but it’s important to remember that the main driver must be the person who drives the car the most.
Learn more about the different types of Breakdown Cover that RAC also provide to help keep you safe on the road.
How is the cost of car insurance worked out?
Your premium is based on a number of factors, including your age, where you live, the type of car you drive, your occupation, where your car is kept, what you use it for and whether you’ve been convicted of any motoring offences.
You can often lower your premium by paying a higher excess, which is the amount you have to contribute towards the cost of a claim you make.
Young people in particular face high premiums because of the greater accident risk they carry, and some may be tempted to cut corners to get a cheap deal.
However, the Insurance Fraud Enforcement Department (IFED) has warned motorists to be on their guard against ‘ghost brokers’, who sell fake insurance.
They prey on those paying the highest premiums (typically young men) by offering cheap deals online, by the roadside or in restaurants.
Always make sure your insurer is regulated by the Financial Conduct Authority.
For every year you don't make a claim on your car insurance, you'll earn a years no-claims bonus. This no-claims bonus is then translated into a discount at renewal, although a reduction in premium is not always guaranteed should there be a change in your circumstances or the markets.
Often, this will remain intact if you make a claim for an accident that wasn’t your fault. You must always notify your insurer of any accidents you’re involved in, even if you don’t make a claim.
With RAC car insurance, you can get up to 70% off your premium if you haven’t made a claim for more than nine years.
Sometimes people's insurance needs are different, and if your car is particularly unusual, you might need a specialist policy such as classic car or American classic car insurance.
Find further information here on car insurance or speak to one of our RAC advisers on 0330 159 1019 to get a quote.