Private car insurance – how does it work?
From understanding what level of cover you need, to knowing how to find cheap car insurance, there is a lot to learn about private car insurance to be confident about finding the right deal for you.
Here we look at the basics to help you make an informed choice whether you need car insurance for yourself, a small business or even a community group.
What is car insurance?
Car insurance, which is required by law in the UK, is designed to help motorists with the costs of driving related damages or injuries. However, whether or not your own vehicle and personal injuries will be covered is dependent on the level of cover you take out. There are three levels of cover available:
- -Third party only: Covers liability for injuries to others and damage to their property; as well as liability while towing a caravan or trailer.
- -Third party, fire and theft: Third party only cover, with the addition of protection against fire, theft or attempted theft of your own vehicle.
- -Comprehensive: Offers everything that is included in third party, fire and theft cover and will usually cover repairs to your own vehicle following an accident (subject to exclusions). Comprehensive policies vary from insurer to insurer but typically cover medical expenses, accidental damage and windscreen cover.
In addition to standard cover, many car insurers offer ‘optional extras’ – this is additional protection available at extra cost. Features may include: a courtesy car while yours is repaired; personal accident cover; insurance while driving abroad; breakdown cover; and legal expenses.
What else should you look out for?
When choosing a car insurance policy your focus should be on finding the right level of cover at the right price – however, there are a number of additional features that you must pay attention to, including:
- -Policy excess: Most insurers set a ‘compulsory excess’ which is an amount you must pay towards a claim. On top of that you can add a ‘voluntary excess’ – an additional amount that you agree from the outset to pay if a claim is ever necessary. Setting the excess at a high level can reduce car insurance premiums, but it should only be set at a level that is comfortable for you to afford in case an accident occurs.
- -Policy exclusions: Read the terms and conditions carefully for exclusions – these are areas that your policy will not cover. For example, most insurers will not cover you to take your car on a race track unless specifically stated.
- -No-claims bonus: This is a reward for people that don’t make a claim on their policy and could cut premiums by as much as 60 per cent after five years. Most insurers have maximum no-claims bonuses and you can often protect the bonus once you have reached the maximum level.
What about cars for small businesses or community groups?
Most car insurance policies cover ‘social, domestic and pleasure’ use and commuting – this covers the day to day use of a car and travelling to and from work. However, if you want a car for business use you will normally have to apply for specific cover which typically takes one of three forms:
- -Private and occasional business use: Covers private use, commuting and use for occasional business purposes. Crucially however, the vehicle must not be registered for business use and should not be an essential part of earning your income.
- -Private and business use: As with private and occasional business use cover, but this type of policy covers vehicles registered for business use.
- -Commercial travelling: This form of cover is designed for those travelling in their own vehicle as a regular part of their job.
If you use a car as part of a community group, for church functions or charity events, then consult your insurer to ensure you are covered. Look into the costs of adding named drivers on a temporary basis in case you are unable to make an event but the group still requires use of your car.
In addition, several specialist insurers offer minibus insurance for community groups with low cost rates and low policy excesses. There may also be discounts available if the designated driver takes minibus training.
How to save money on private car insurance
There are several ways to save money on private car insurance including:
- -Choose your car carefully: Vehicles with smaller engines, standard specifications and no modifications generally qualify for lower premiums.
- -Increase security: Adding insurer-approved alarms, immobilisers and tracking devices could earn discounts.
- -Park safely: Park your car in a garage overnight and in a secure area, such as business grounds, during the day.
- -Agree to a mileage limit: If you can prove to an insurer that you will only travel limited distances you could reduce your premiums.
- -Pay annually: You can avoid monthly interest charges by paying premiums upfront.
Courtesy of Gocompare.com
